Retail Stocks Paint Robust Picture
Stocks in the US started the trading session on the defensive dragged lower by Chinese equity bourses that declined nearly 2%. Earnings results from retail chain Macy’s (NYSE:M) showed that the consumer continues to show strength. Mid-day stocks turned positive and continue to climb higher into the close, with the S&P 500 notching up a new all-time high.
Global equity prices began to selloff overnight as investors sold Asian shares when the conclusion to China’s Third Plenum failed to resolve free-market issues, leaving the economy still in the hands of China’s bureaucrats.
The broader markets also faced headwinds as the Bank of England upgraded growth prospects which points to a possible rate hike earlier than expected. In its quarterly inflation report, the Bank of England increased its expectations for unemployment and said it could hit the 7% threshold earlier than expected. The central bank now says the jobless rate could fall to 7% by the second half of 2014 compared to the previous guidance of mid-2016.
Despite all of the negative macro events traders instead focused on earnings. Macy’s reported third quarter earnings of $0.47, up 31% from year ago levels of $0.36 per share. Analyst had forecast that the company would produce earnings of $0.39 per share on sales of $6.18 billion. The company reiterated its guidance provided in August 2013. Comparable sales are expected to increase in the range of 2.5 percent to 4 percent in the second half of 2013, and in the range of 2 percent to 2.9 percent for the full-year-2013. Earnings for fiscal 2013 are expected in the range of $3.80 to $3.90 per share.
The S&P 500 continued to gain traction pushing higher on solid momentum. The MACD is poised to generate a buy signal which should continue to propel the broader markets higher.
The strength in the consumer sector has pushed the XRT retail ETF to new highs, notching up a 4th consecutive higher close. Momentum is solid as the MACD (moving average convergence divergence) generate a buy signal and is printing in positive territory with an upward sloping trajectory. The RSI is printing near 67 which is on the upper end of the neutral range reflecting positive momentum.
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