By Carlos Guillen
After yesterday's rather precipitous stock market drop, which left the Dow Jones Industrial Average down over 320 points in the red, today investors have slammed the brakes on stock losses and are actually driving prices higher, currently gaining over 90 points on the Dow.
Explaining the very disappointing trading session from yesterday is rather difficult, but one thing is for sure, investors have become incredibly sensitive to any bits of negative news. While yesterday it was worse than expected ISM data that was blamed for the losses in share values, investors' fears have been ramping to maximum levels most recently, so virtually anything can cause market disruptions at this juncture. Continuing Fed tapering is still a major concern for equity investors, in addition to weakening growth in China and other emerging markets. The result is simply extremely edgy investors.
Here at home, the main bit of economic data out today was durable goods orders, and the result was a bit better than expected, thank goodness for that, but it was still discouraging. According to the U.S. Census Bureau, new orders for manufactured goods during December decreased month-over-month by 1.5 percent to $489.2 billion, better than the Street's consensus estimate calling for a 1.7 percent month-over-month decline. Concurrently, new orders for consumer goods remained flat, after increasing by 0.9 percent in the prior month, and non-defense capital goods (excluding aircraft) declined by 0.6 percent, after increasing by 3.0 percent in the prior month. These capital goods orders are considered a proxy for future business investment in items such as computers, engines and communications gear, so this decline may be indicative of slowing growth in the near term. It is apparent that concerns over the Fed's tapering action, which means higher borrowing costs for capital spending, is causing a companies to slow on growth investments.
While stocks are up so far into the trading session, perhaps they could have been higher. However, Richmond Federal Reserve Bank President Jeffrey Lacker did little to calm investors by saying today that the Fed will likely continue reducing its bond purchases in the coming months because there has been substantial improvement in labor market indicators since the program started in late 2012. While there is still more data coming in the following days, investors will remain focused on jobs data out this Friday, as well as the European Central Bank's policy statement this Thursday.
Chain Store Sales Fall Flat
By David Urani
ICSC-Goldman gave out its weekly retail chain same-store sales data today, it's not a widely followed data set and usually doesn't reveal a whole lot but this week is pretty interesting. On a year over year basis, same-store sales fell flat for the first time since February 2010. Certainly weather played a role, as conditions were unusually snowy around the nation. However, this is yet another weak indicator from the retail space following a holiday season that we know was highly price-competitive.
On a week-to-week basis sales were actually up 0.3%, but overall it goes to show January was quite a dull month for retailers and that's something we've seen echoed in the space for months now with company guidance.
Chart via Econoday