Will Markets Get Over Disastrous Retail Sales Report?

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Posted: Feb 15, 2019 10:41 AM
Will Markets Get Over Disastrous Retail Sales Report?

It was an interesting session on Thursday that saw the Dow Jones Industrial Average race toward the plus column, suddenly run out of gas, and tumble to a triple-digit loss. The late selling began, as it was clear President Trump would sign the spending bill into law and avoid another government shutdown. 

The bill itself is more than 1,100 pages long and racks up $300 billion in spending. All the focus is on kicking the can down the road as concerns over fiscal displace is recessed into the woodwork.

Selling the news isn’t new, and I wonder what happens if there’s a China trade deal. It would depend on where the market is at the time, but I wouldn’t be surprised if there was a spike followed by profit-taking. The market is also losing steam after the Atlanta Fed lowered its fourth quarter 2018 Gross Domestic Product (GDP) estimate to 1.5% from 2.7%, after that disastrous Retail Sales report. 

Yesterday, Larry Kudlow suggested there were glitches in the report. I’m not sure if he means the report is incomplete, or if he feels the noise (such as the stock market free-fall and the government shutdown in late December) were temporary influences. 

Although Larry Kudlow is talking about “just a glitch,” it reminds me of Biz Markie - rapping - questioning “Just a Friend.” I think the market will get over the Retail Sales report,although I am not sure how much it will hurt the chances of 3.0% in 2019.

However, I’m not sure what the deal was last month, but the American consumer is not overleveraged or broke, but just a lot smarter. I have been saying and writing this for years that a different consumer has reemerged since the Great Recession. One that got over their skis before using their homes as piggy banks and thinking the good times would never end. 

Maybe younger adults are okay with spending, but a lot of folks are still scared. 

Nvidia: Living up to the Hype 

It was a rough quarter for Nvidia. Investors had been warned a couple of times there would be challenges, especially after the implosion of cryptocurrency leaving the company with tons of inventory. Even though revenue was down 24% from a year ago and -31% quarter-to-quarter, the company saw a record full-year revenue in several areas, including:

• Gaming

• Data Center

• Professional Visualization

• Autonomous Vehicle 

The best development was non-GAAP (generally accepted accounting principles) operating margins that surged to 36.9 from 13.3. As for the company, it’s still firing on all cylinders with respect to innovation.  Long-term investors are right to be attracted to all the hot areas where the company is a clear leader:  

• Artificial Intelligence 

• Robots

• Autonomous Vehicles 

Still, the stock can be a wild ride. The shares are up 15.8% for 2019, but -36.0% over the past 52-weeks. And now, it’s looking for a pop big time at the start of trading. This is one of those momentum darlings that can spark the market with wide excitement.

Today's Session

Lot of economic data out this morning, coupled with news that some progress is being made on the U.S. - China trade negotiations.  The futures were up and down in the pre-market but have opened firmly in the green with Dow up over 200 points.