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Financial Sector Reports Record Profits

The financial sector had a…

Retail Irony: Sales Jump 1.3%, Treasuries Rally

Retail sales jumped 1.3% in April following yesterday's miserable stew of retail sales reports.

Last evening ZeroHedge sarcastically tweeted

Zero Hedge Tweet on Retail Earnings

He was correct.

For the second irony, the report was so good, that US treasuries rallied.

The Bloomberg Econoday consensus estimate for retail sales was 0.9%. Sales jumped 1.3%.


Highlights

The consumer snapped back to life in April, driving retail sales 1.3 percent higher to beat Econoday's consensus by 4 tenths and the high estimate by 1 tenth. Gains are spread throughout most of the report.

Autos are the key component, up a sharp 3.2 percent to reverse the prior month's decline. Excluding autos, retail sales rose 0.8 percent.

Sales at gasoline stations, boosted by higher prices, also contributed strongly, up 2.2 percent in the month. But even excluding both autos and gasoline, sales still rose 0.6 percent for the third straight gain, two of which are very strong.

Apparel was a big contributor in April along with nonstore retailers and with restaurants also showing a gain. The only component in contraction was building materials & garden equipment which hints at a little cooling for what has been very solid residential investment.

Year-on-year rates all improved though total sales remain very soft at 3.0 percent. Auto sales, pulled down by tough comparisons with very strong sales this time last year, are up only 3.1 percent on the year. But other components show strength with the ex-auto ex-gas rate at a healthy 4.4 percent for a 5 tenths gain in the month.

Today's report points to a solid start for the second quarter and gives some life to the possibility of a June FOMC rate hike.


Retail Sales Charts

Retail Sales Charts

Charts from Census Department Advance Monthly Sales.

Some of these numbers look peculiar so let's dive in further.

Retail Sales by Business Type

Department stores are not doing well to say the least. Non-store retailers are up a big 10.2% from a year ago, but that base is on a small number.

Here's a chart I posted yesterday in Retail Department Store Carnage: Amazon to Blame? Mish 12-Point Summation.


Apparel Market Share

Apparel Market Share

A 10% growth in something weighted 6% cannot fully explain a decline in sales at components that total 41.6% of the retailers.


June Hike?

Adding to the surreal nature of of today's retail sales numbers, US treasuries rallied.

Bond Prices

Every month the Bloomberg Econoday writers keep hoping, praying, and discussing rate hikes.

This is what the market thinks.

CME Group Fed Watch

A quick check shows the market does not expect a hike until December.


Yield Curve

Yield Curve
Larger Image

That chart is as of yesterday's close. Yield on the long end are down a couple ticks today.

The market does not see hikes are imminent, and neither do I.

 

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