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U.S.-China Trade dominated the headlines last week. As trade talks stalled, the U.S. increased the previously announced tariffs on Chinese goods from 10% to 25%. The U.S. is also investigating options for tariffs on an additional $300 billion of Chinese-made goods not currently under tariffs. The Chinese Vice Premier spent last week in the U.S. at negations and expressed some cautious optimism after talks ended on Friday.
The breakdown in negotiations and increased tariffs shook the market this week, sending the S&P 500 Index down 2.2%. There was a relief rally on Friday afternoon, but downside looks to continue on Monday.
The U.S.-China headlines overshadowed continued good corporate earnings reports. Earnings continue to have a positive surprise averaging +6.1% above consensus. For the S&P 500, 448 out of 500 companies have reported with 75% beating expectations, 6% matching and 18% below expectations. The combined (reported and estimated) earnings growth for the first quarter now stands at +1.3% versus -2.3% a month ago.
Financial Market Update
Dissecting Headlines: Retail Sales
Consumer spending accounts for approximately two-thirds of U.S. GDP. One monthly data point that captures a real time look at spending is the Retail Sales Report. This report contains major retail categories to include furniture, building materials, food and beverage, health and personal care, department stores, automobiles, and online retailers.
Two headline numbers are usually reported: Retail Sales and Retail Sales ex Autos. We also like to analyze the data with and without the impact of gasoline stations because volatility in the price of gasoline can distort the monthly or annual comparisons.
Seasonality can also have a large impact on overall sales and within categories. The report issues data that is both seasonally-adjusted and non seasonally adjusted. The seasonally-adjusted data is good for month-to-month comparison and non seasonally adjusted is best for year-to-year comparisons.
The April Retail Sales report will be released on May 15th and can offer good insight into the health and confidence of the U.S. consumer.
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Want a printable version of this report? Click here: NovaPoint May 13, 2019
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