This continues to be a market in search of leadership and some kind of catalyst to jump-start it out of a rut, which has seen a record-setting stretch of sideways movement. Yesterday, crude oil popped on a shocking decline in crude and gasoline inventories.  The news lifted the sector nearly two percent and makes it the top performer in the Standard & Poor’s 500 Index this year.

Most of the action this year has been in sectors such as oil, industrials, and materials that were severely oversold coming into the year. But what about the consumer; consumer discretionary names are just muddling along, waiting for consumers to step up to the plate.

Yesterday, we learned late in the session that the overall consumer credit increased $17.7 billion in July against a consensus estimateof an increase of $16.0 billion. The thing is that most of that increase happened in non-revolving credit, which includes student and auto loans.                                                                       

• Non-Revolving $14.94 billion from $5.36 billion
• Revolving $2.78 billion from $9.17 billion 

Credit card debt inched up just 3.5%, belying the notion of a virtuous cycle, but reflecting a populous that’s still reluctant to spend when it comes to credit card debt. Some of this is the reality of living through the Great Recession, although the trend began in the mid-1990s. We have the cash to spend as average financial obligations are significantly below 2008 levels.

There’s no doubt that higher wages must increase to move the spending and borrowing needles; meanwhile, lower expectations could move the consumer discretionary sector higher. Case in point: after the bell on Thursday, an old favorite of mine, Restoration Hardware (RH) posted earnings of $0.44 versus $0.85 a year ago and beat the Street; and now, the stock is much higher.

On the other hand, the biggest loser Thursday was Tractor Supply Company (TSCO), an otherwise great company that saw its shares crushed by more than 16% after missing the Street.

Consumers are the linchpin of the economy. The kind of super-sized growth needed doesn’t happen without big business investment. So, cautious market trading is largely reflective of a cautious nation that’s still feeling the burn of the recession either in memory or in their daily lives.

Today’s Session

The market was bumping along in pre-opening trading when comments from Boston Federal Reserve President Eric Rosengren sent a shot across the bow stating a “reasonable case” could be made for a rate hike because of the growing risk of an overheating economy and financial markets.

Additional concerns and observations:

• Jobs market could reach or exceed full employment over the next year
• Sluggish growth in 1H16 temporary
• Inventory restocking to boost 2H16 resulting in growth exceeding 2%

While bears will take this as a direct attack on equities, the key focus of this warning is centered in commercial real estate, particularly multifamily units.  Rosengren connects the dots that commercial real estate is held in leveraged institutions that would have to deal with a pullback by cutting back on other lending and loan businesses.

I still don’t see the Fed hiking before the election, but I do think December is in play.  That said, there is no inflation scare (see pressure on supermarket stocks as food prices slide big time and there is anecdotal evidence rents in NYC and other places turning lower) and wages are not moving fast enough to spark Inflation 101 (too much money chasing too few goods and services).

There is no doubt the market has been grappling with direction and today’s pressure will give us a glimpse as to how much convictions remains among the bulls.

Sunday marks the 15^th anniversary of the tragic 9-11 terrorist attack on America.  We remember and honor all those that lost their lives and the many heroes that helped saved lives while protecting us.  God Bless them and God Bless America.