Weak data, optimism and earnings summarize the day

The retail sales data this morning was disappointing no matter how much you twist and turn the numbers. For June they fell 0.3% to post the first decline in four months. The estimates were for a rise of 0.2%, but that was obviously not even close. April and May were revised lower as well… this is not good for the outlook relative to economic growth. The declines were fairly distributed from cars, clothes, furnishings, and dining out. Online retails was lower along with the home improvement stores. Take out gasoline and sales fell 0.4%… what does this tell us about the economy going forward? Weakness is still in play and optimism the Fed held out at the last FOMC meeting may not materialize. Despite all the negatives from the report the buyers continued to push the indexes higher. Optimism at it’s best.

One interesting fact in the retail news is that economist were expecting sales to move higher in June and looking forward… due to the rise in employment and falling unemployment rate! Evidently they missed the part about quality jobs and stagnant wages. Just goes to show that no one really looks at the details behind the headline numbers.

Earnings are all the buzz… not really. They should be, but the focus is on other news and topics, or worries. JP Morgan announced this morning and beat expectations on lending and M&A activity. The stock moved higher in response. Wells Fargo was in line with expectations. However, their revenue was lower with fees down in key business sectors, but the stock still posted a nice gain on the day. In response the banking sector (KBE) was up modestly. The sector remains in an uptrend and is positioned to take on a leadership role if it can get through the earnings period without much in terms of disappointment. The outlook is for revenue to increase on the hike in interest rates. The bigger challenge with Q2 earnings is the inability to generate sales in a low growth environment of which the economy cannot seem to shake. According to FactSet the forecast for per share earnings on the S&P 500 index is a decline of 4.4%. That does not hold out much hope… if that proves to be valid it will be the second quarter in a row with negative results and that would equate to a revenue recession… BIG SHOCK! But, stocks have been attempting to rally in the face of these projections. Hope springs eternal.

The Iran nuclear deal is official and they will start shipping oil? What does this mean for the supply data? Time will tell, but the speculation is for the supply to rise and put pressure on the price of crude near term. Crude declined 1% initially on the release of the news, but then recaptured the sell off and analyst are projecting a rise in oil prices… go figure. Analyst are predicting stocks will rise along with the price of crude. Despite what we might think about the negative impact of increased supply the belief is production in the US is declining at a rate to absorb increases in supply? That will have to be proven going forward, but crazier things have happened. I say watch how this unfolds near term. OIL fell to support near the $10.35 mark and holding. If it can bounce and clear near term resistance at the $10.70 mark, it could validate a technical trade on the reversal. Watching to see how that unfolds.

As we conclude another trading day I wanted to leave you with a thought… Are you chasing wealth or are you focused on building it methodically over time? I ask this question in response to many conversation I have had of late with investors. There seems to be a fundamental change in the view of investors. I used to call it greed, but I am more convinced it is a matter of chasing wealth. The need to make gains quickly without respect for risk. I used to write about the “get rich quick schemes”, but now that seem to be the norm when it comes to market strategies. I may be from the old school, as my daughters tell me frequently about social media, but chasing wealth never ends well. You may post some big wins along the way, but eventually the lack of respect for risk ends poorly. Evaluate your strategy, evaluate your motives, and most importantly evaluate your purpose. Building wealth methodically in tune with risk is the best course of action… old school or not, it still works.