Weak Retail Sales Data Fails To Halt Equities Rally
Today’s Spotlight Market
Traders and analysts will have a slew of economic data to sort through the remainder of the week, including PPI and Industrial Production for June, which will be released this morning. Later this afternoon we will have the release of the Federal Reserve Beige Book for July. On Thursday, we will have weekly jobless claims and the Philadelphia Fed Index for July. Friday will bring CPI, housing starts and building permits for June, as well as the University of Michigan consumer sentiment index.
Fundamentals
After a sharp rally in U.S. equities on Monday, the market took a bit of a breather on Tuesday, with the E-mini S&P 500 futures trading modestly higher and trading volume rather light compared to recent sessions. The rally continued, despite the rather disappointing report on U.S. Retail Sales for the month of June.? The Commerce Department reported that U.S. retail sales fell by 0.3% in June, vs. an expected gain of 0.2%. Both April?s and May?s retail sales figures were revised down from their original estimates, which added to the negative sentiment. Gasoline sales were the one ?bright spot? in the report, posting a 0.8% increase in June.
Economists tend to look at Retail Sales data as an indication of the mood of the U.S. consumer. It was expected that consumer spending would briskly recover following another brutal winter which sharply curtailed household purchases. More importantly, Tuesday?s data will do little to sway the Federal Reserve to move towards raising interest rates in the near-term, with the market currently forecasting a 13% probability of an interest rate hike in September and a 49% probability of a rate hike in December.
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for the E-mini S&P 500 futures, we notice prices breaking out to the upside of their recent 2-week consolidation pattern. Prices are now back above the 20-day moving average and are approaching the minor downtrend line drawn from the contract highs made back in May of this year. We should note that trading volume has been light the last few sessions as prices have rallied, which could signal that traders are still reluctant to get overly bullish at current price levels. The 14-day RSI has turned positive, with a current reading of 55.60. The June 22nd high of 2122.00 is now seen as the next chart resistance level, with support found at the recent low of 2034.25.
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