- Retail sales rose 1.2% in July from the prior month and 2.7% from the prior year
- The Consumer Price Index increased 1.0% in July from the prior year
- 83% of S&P 500 companies that have reported Q2 earnings have exceeded analysts’ earnings estimates
Top Three Market Headlines
Retail Spending Recovery Remains on Track: Reflecting U.S. consumers’ resilience, retail spending rose in July for the third straight month. The Commerce Department reported last week that sales at retailers increased at a seasonally adjusted pace of 1.2% compared to June and 2.7% from a year ago, with gains recorded in nearly every product category. Excluding the volatile auto and fuel categories, sales increased by 1.5% from June and 3.9% from the prior year. While the pace of gains slowed from the prior two months, it was nevertheless enough to push the absolute level of spending above pre-pandemic levels.
Consumer Prices Rise Modestly: After being depressed in recent months by COVID-19-induced business shutdowns, inflation indices picked up modestly in July, according to data published last week by the U.S. Bureau of Labor Statistics. The Consumer Price Index (CPI), a measure of the change of prices paid by consumers for a basket of goods and services, rose 1.0% in July from a year earlier, the fastest rate of growth since March, but still down meaningfully from the 2.5% annual rate posted as recently as January. Core CPI, which excludes food and energy, increased 1.6% annually, also the highest rate since March, but down from 2.4% in January. Meanwhile, the Federal Reserve is expected to finalize a policy-making review next month that some observers believe will lead the central bank to adopt a more liberal inflation-targeting approach.
Corporate Earnings Surprise to the Upside: With the second-quarter earnings season nearing a close, investors have been relieved that many corporate earnings reports have exceeded depressed expectations. According to FactSet, of the nearly 90% of S&P 500 companies that had reported Q2 earnings through August 7th, 83% surpassed the estimates of Wall Street brokerage analysts, the highest percentage since FactSet began tracking the metric in 2008. Despite the positive surprises, reported earnings were nonetheless down 34% year over year, the largest decline since the Global Financial Crisis. Eight sectors have reported declines in earnings, led by Energy, Industrials, Consumer Discretionary, and Financials, while just three have reported growth, including Utilities and Health Care.