Today, we’ll get the latest retail sales report, which should give insight into consumer momentum. There has been a sharp rise in retail bankruptcies this year and continued pressure on brick-and-mortar names, including T.J. Maxx (TJX) and Dick’s Sporting Goods (DKS) as of yesterday. Even Home Depot (HD) - with the most stellar earnings results and robust guidance - barely held onto gains. 

However, there are still oversold names such as Advance Auto Parts (AAP), which went parabolic on its earnings report.  Actually, auto-related names from dealers to do-it-yourself shops have enjoyed a stronger second half of 2017 than anyone has predicted. The bottom line is that folks are spending money in different ways than ever before, and it is having a profound impact on the retail landscape.

The big question is whether consumers can step up to the plate?

In September, consumers accessed $20.83 billion in credit whereas the Street was expecting $18.0 billion:

• Revolving +6.30 billion
• Non-Revolving +$14.4 billion

Much has been made about household debt eclipsing the all-time high level that precipitated the Great Recession. In fact, the household debt service payment as a percentage of disposable income has declined from 13.2% on the eve of the recession to 9.9%, which is currently the lowest on record.

We keep hearing about debt payment delinquencies, but it’s really just one red flag (student loans).

 

Household Debt 3Q 2017	Q/Q CHANGE	Y/Y CHANGE	TOTAL	Delinquent
MORTGAGE	+ $52 BILLION	+ $393 BILLION	$8.74 TRILLION	1.2%
HELOC	- $4 BILLION	- $24 BILLION	$448 BILLION	0.9%
STUDENT LOAN	+ $13 BILLION	+ $78 BILLION	$1.36 TRILLION	9.6%
AUTO LOAN	+ $23 BILLION	+ $78 BILLION	$1.21 TRILLION	2.4%
CREDIT CARD	+ $24 BILLION	+ $61 BILLION	$808 BILLION	4.6%
TOTAL DEBT	+ $116 BILLION	+ $605 BILLION	$12.96 TRILLION	2.4%

 

The Market

Tuesday was another test of resolve for investors. While major indices closed well off the lows of the session, we saw true grit, considering that the Dow was off 168 points during the session.

There were signs of a major shift in the breadth of the market as losers were getting pounded. Yesterday, new 52-week lows outnumbered highs:

• NYSE: 113 New Highs versus 137 New Lows
• NASDAQ: 71 New Highs versus 98 New Lows

Moreover, utilities remain the hottest sector of the market, hitting a fresh all-time high up 17% in 2017 alone. That isn’t supposed to happen to the market’s safe haven.

Like the stock market, small business confidence is holding on but it is beginning to drift.

The latest read from the National Federation of Independent Business (NFIB) was slightly less than anticipated, but there were strong highlights:

• Current Job Openings: 35% +5 points
• Good Time to Hire: 23% +6 points
• Expect Real Sales Higher: 21% +6 points

Of course, most of this anxiety traces back to Washington, D.C. and whether the GOP leadership can deliver or not.  With the Senate throwing in the removal of the individual mandate late yesterday, it helped to shore up the market. Coupled with President Trump’s return (from his 12-day, five countries Asia tour), he is headed straight to Capitol Hill to close the deal.

Speaking of which, it’s too early to tell know how much Trump’s tour changed the dynamics of trade. However, the Commander-in-chief scored big time engineering the release of three members of the UCLA basketball team arrested in Beijing for shoplifting. Question: will President Trump get the kind of props President Obama would have gotten for securing the release of those student-athletes?

I continue to say the market is poised for a huge but selective rally if Republicans can deliver…the question is will they deliver? 

Today’s Session

Futures are under pressure once again and not getting any help from the mix of economic and earnings data.

Retail Sales were slightly better than expected, as 9 of 13 categories improved month to month.  I wasn’t surprised building materials and gardens declined, but the -1.2% swoon was huge.  Non-store retail, otherwise known as the Internet, also dipped -0.3%, although, it's up 6.8% year over year.

Positive surprises include sports goods +1.5%, motor vehicle +0.7% and department stores +0.2%.

Speaking of retail, Target posted financial results that beat on revenue and earnings as comp stores increased at twice the rate the street anticipated.  But, the shares are lower on lackluster holiday guidance.

For now, the market has hit a rough patch.  The best action is to be cool, but also ditch laggards that are down on fundamentals.  By the same token, be careful not to dump stocks the street sold based on knee-jerk herd reactions. 

 

Comments

The Rino's hate Trump. Therein lies the rub. gregg paucek on 11/15/2017 10:20:00 AM

Nice Report J. Price on 11/15/2017 11:14:33 AM

I have finally come to the unhappy conclusion that the so-called Senate GOP "leadership" doesn't know WHAT they are doing. Left to his guise, Mitch McConnell will SURELY destroy "The Party" by the time the next congressional elections come around and WE will no longer have to worry about whether our nation continues down the road to outright Socialism, or has a chance to recover from the Obama years. The way in which the Republicans are handling this matter of Judge Roy Moore and his "alleged" sexual predator-ship is an embarrassment! McConnell stating that the U.S. Senate will REJECT the seating of Moore (should he be elected) is absurd, ridiculous and the STUPIDEST comment I believe a leading figure in the Grand Old Party could make. Pardon the pun, but WHO made McConnell judge and jury in this matter? WHY is this becoming such a political football when it is the people of the state of Alabama who should be allowed to make up THEIR minds as to whether Roy Moore should WIN or LOSE, NOT McConnell OR the GOP. If this is the way in which this national party is going to conduct itself when challenged by forces OUTSIDE of politics, then get ready for a total and COMPLETE takeover of Congress by the Democrats. One suggestion to McConnell: Mind one's OWN business and the "running" of the Senate, as I believe you have ENOUGH to do there and aren't doing a very GOOD job there...at THAT! James Warlin on 11/15/2017 1:35:14 PM

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