Stock Market Update

Equity futures point to a slightly higher open this morning following a fresh wave of earnings reports and a sizable batch of economic data.

The retail sales and initial jobless claims reports were both solid in terms of messaging for consumer spending and consumer spending potential.

The stock market should like these numbers in consideration of the growth outlook, yet this strength will continue to weigh on expectations for a near-term rate cut.

Total retail sales increased 0.6% month-over-month in June (Briefing.com consensus: 0.2%) following a 0.9% decline in May. Excluding autos, retail sales rose 0.5% month-over-month (Briefing.com consensus: 0.3%) following an upwardly revised 0.2% decline (from -0.3%) in May.

The key takeaway from the report is that the sales pickup was fairly broad-based across retail businesses following declines in April and May. Importantly, the June report also conveyed increases in discretionary spending activity, captured in areas like autos (+1.2%), apparel (+0.9%), building materials and garden equipment supplies (+0.9%), and food services and drinking places (+0.6%).

Initial jobless claims for the week ending July 12 decreased by 7,000 to 221,000 (Briefing.com consensus: 230,000). Continuing jobless claims for the week ending July 5 increased by 2,000 to 1.956 million.

The key takeaway from the report is the remarkably low level of initial jobless claims, which connotes limited layoff activity that fits hand-in-hand with good business conditions and a good outlook.

Separately, the Philadelphia Fed Index jumped to 15.9 in July (Briefing.com consensus: -0.2) from -4.0 in June, led by increases in the indexes for new orders, shipments, and the number of employees. However, there were also increases registered in the indexes for prices paid and prices received. The dividing line between expansion and contraction is 0.0.

Import prices in June were up 0.1%, as were nonfuel import prices. Export prices, meanwhile, jumped 0.5% month-over-month, as did non-agricultural export prices. On a year-over-year basis, import prices were down 0.2%, nonfuel import prices were up 1.2%, export prices increased 2.8%, and nonagricultural export prices jumped 2.9%.