Last night, Amazon.com (AMZN) posted financial results for the first-quarter earnings that slightly disappointed investors, sending the shares lower.  That disappointment revolves around the company’s small sales miss in their cloud business, Amazon Web Services (AWS), which grew 47% year-over-year. In the fourth-quarter of 2015 (4Q15), it grew by 69%.  But the company continues to be a retail juggernaut, which explains the announced $1.5 billion air cargo hub to be built in Northern Kentucky.

The fact of the matter is that despite the tale of woes that we saw from brick-and-mortar retailers over the holidays, there are signs that consumers are actually spending money.

Perhaps impervious to Amazon are the big-box stores that keep raking in the dough.  In January, Costco (COST) saw its sales climb to $9.08 billion (or 9%) from a year earlier, driven by a 6% surge in comparable same-store-sales and 5% without gasoline.  This is the highest increase since August 2014.

Comparable Store Sales	January (4 Weeks)
US	+6%
Canada	+11%
Other International	+4%
Total	+7%

Adjusted for gasoline and currency

Comparable Store Sales	January (Weeks)
US	+5%
Canada	+1%
Other International	+8%
Total	+5%

The fact that consumers are spending is also reflected in the stock market via the S&P Retail Index (RLX), which is up 20% in the past year alone.  It’s true, the move is paced more by a handful of stock names, but it doesn’t underscore that people are spending and probably will continue to spend.

RLX

 

Of course, in order for people to spend, they need to have cash (memo to GOP: tax reform sooner rather than later). However, an actual wage increase would be a real source of sustainable Main Street spending and investing.

On that note, everyone’s looking for today’s employment report from the Bureau of Labor Statistics (BLS) to come in well above the 175,000 consensus. It’s because the ADP report was significantly better than anticipated.  Now, the consensus is 225,000 with higher wages to boot. 

I saw a piece on Zero Hedge, noting the normalcy of the BLS that signals major turning points; however, I think the ADP report is becoming a better predictor of private sector employment.

 

The pieces are coming together. While we have hit a bump in the road that mirrors the angst in Washington D.C., make sure you are positioned for a leg higher in the next market.  There is a lot to chew through; make sure you get my daily commentary at wstreet.com.

CEO Pow Wow

Donald Trump kicks off today with a big CEO pow wow with his business advisory council and the President’s Strategic and Policy Forum.  It’s unclear if all 19 members will attend, but it’s for sure that *Travis Kalanick and Bob Iger won’t after resigning from their positions yesterday.

The meeting begins with the president speaking for up to 15 minutes, followed by council chair Stephen Schwarzman, CEO and Co-founder of Blackstone. The focus will be on four topics:

• Regulatory Relief
• Women in Workforce
• Taxes and Trade
• Infrastructure

After the bell on Thursday, Snap Inc. announced its intentions to go public as the company will issue three classes of stock, including a non-voting public share on the NYSE. I have no clue if it’s a buy yet, but zero voting rights are a red flag in my opinion.

 

 

 

 

 

Comments

Travis Kalanick and Bob Iger are gutless wonders that missed a HUGE (in Trump's words) opportunity to educate the country on right thinking and decisions based on principles. It is an incredible chance to be among those that are instrumental in giving input to fixing all the damage that has been done trying to emulate Europe... Thank God for those with thicker skins and guts. Go big or go home! Ray Weldon on 2/3/2017 2:06:20 PM

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