By Carlos Guillen
Stocks are making a very encouraging move to the upside as strong sales figures from various automakers and more clarity on the Syrian situation develops, more than offsetting the rather poor trade deficit data.
A bit discouraging today was that the U.S. trade deficit increased more than expected in July, as exports decreased while imports climbed, a scenario that was the opposite of what occurred in the prior month. According to the U.S. Department of Commerce, the trade deficit during July totaled $39.1 billion, increasing from the $34.5 billion reported for June and landing above the Street's consensus estimate of $38.2 billion. In terms of the two main components, exports decreased 0.57 percent to $189.4 billion, as overseas demand eased mainly for capital goods by $1.6 billion and for consumer goods by $1.4 billion. Imports climbed 1.56 percent to $228.6 billion, mainly as domestic demand increased for industrial supplies and materials by $2.0 billion and for automotive vehicles, parts, and engines by $0.8 billion. Given that net-exports play a direct effect on gross domestic product (GDP), a wider deficit could lead economists to revise their growth estimates lower for the third quarter of this year.
Clearly encouraging investors today was that Ford reported its best retail-sales month in seven years, and putting the icing on the cake the company also increased its production plans for the fourth quarter. This is a strong indication that consumers are feeling better about their financial situation, which is likely to also fuel consumer spending in general: more on autos below.
On the situation in Syria, it is apparent that some action will take place, and later today there will be a congressional vote authorizing military strikes against Syria; if passed, the resolution could face a full vote from the Senate next week.
Also later today we will be looking at the Fed's Beige Book, and once again investors will be looking for traces of Fed tapering; however, Friday's jobs report will make or break markets.
Auto Sales Impress
By David Urani
August auto sales have been rolling in today, and it looks like they've largely been living up to some optimistic expectations. In fact, it could end up being the best month in more than six years. Furthermore, each of the big three were up double-digit percentages over last year. Consumer demand has remained solid while auto loans are being doled out freely (some might say too easily). In fact, JD Power notes consumer auto spending could hit $36 billion for the month, which would be a new record. GM GM had the best month of the three, up 14.7%; that included a 38% gain for Cadillac which made for the best sales for that brand since 1989. Ford F and Chrysler were close behind at +12% each.
GM also turned in the highest unit volume of all brands but Toyota is looking strong in second place, with arguably the most impressive month. They turned in a 22.8% unit increase which takes them to 231.5k units versus GM's 275.8k. It was Toyota's best month in over five years.
Once again for the industry it looks as if trucks and SUV's are leading the way. Pickups and SUV's were up 15% and 29%, respectively for GM, and Chrysler posted a 31% increase in light-duty pickups. Overall, everyone is hoping this month is the month we break the 16 million annual rate last seen before the recession and so far it's looking like that might finally happen.