Market Overview

Data on Imports, Exports Might Signal a Stable Recovery

According to the Bureau of Labor Statistics, U.S. import prices rose 0.3 percent in January, meeting analyst estimates. The price of U.S. exports jumped higher than expected at 0.2 percent, ahead of analyst estimates of 0.1 percent. The figures will impact a variety of sectors in the U.S. in different ways, but the figures generally suggest that recent trends towards a stable economic recovery in the U.S. may continue into spring.

While the price index for nonagricultural supplies and materials fell 0.4 percent in January, export fuel prices rose 1.3 percent as higher oil prices drove upstream prices, thanks to worries over tensions with Iran and the possibility of EU sanctions on Iranian oil drives speculation that limited oil availability will drive up prices. Instability in Syria and Sudan have also helped to keep oil up. While major U.S. oil companies Exxon (NYSE: XOM) and Chevron (NYSE: CVX) are poised to profit, international difficulties in the Middle East and elsewhere have pushed prices up.

One of the biggest spikes in prices was the cost of air passenger fares, which rose 3.2 percent in January on top of a 3.8 rise in December. Air freight prices are up 1.6 percent, a massive jump compared to the 0.1 percent increase in December. Higher prices for flights are inevitable with higher oil costs as many airline companies are still struggling to remain afloat.

Meanwhile, a drop in metals besides iron and gold led to a 6.3 percent drop in industrial export prices. This contrasts with the price for finished goods, which rose by 0.4 percent and the price of exported cars rose by 0.2 percent. That price increase in cars reflects strong demand for American cars, as General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler have recovered from the dark days of 2009, when bailouts saved the car companies as well as GMAC from collapse.

On the import side, finished goods showed mixed results, with capital goods rising by 0.4 percent and cars rising 0.5 percent. Prices on imported consumer goods fell for the first time in ten months despite an increase on goods from China, which is a continued challenge to domestic retailers like Target (NYSE: TGT), Costco (NASDAQ: COST), and Wal-Mart (NYSE: WMT), who have bet heavily on cheap Chinese imports in the past couple decades. However, retailers will also benefit from overall lowered prices on imports for other products. Lower import prices on goods from other countries will favor companies that import from other countries. Best Buy (NYSE: BBY), which sells several electronics from Taiwan, South Korea, Japan, and Germany, could benefit from lower costs, in addition to Amazon (NASDAQ: AMZN), which also offers a variety of imported consumer products.

The import/export data is mixed, but broadly points to a continued stability in America's import and export market with no surprising bad news. The data may help offset disappointing retail sales figures, even if the BLS stats could not save stocks from falling in trading on Tuesday. Looking ahead, the data may suggest that a protracted bearish market may not be coming in the short term, even if the retail sector's recovery is a slower affair than analysts had previously hoped.

ACTION ITEMS:

Bullish:
Traders who believe that the export/import data will buoy markets might want to consider the following trades:

  • Buy into one of the U.S. oil companies or an ETF covering the industry, such as the Energy Select Sector SPDR (NYSEARCA: XLE) or the SPDR S&P Oil & Gas Explore & Production ETF (NYSEARCA: XOP).
  • Those looking to zero in on lower import costs on consumer goods might want to consider the retail sector, especially after the disappointing news brought these stocks down. ETFs for the big box retailers include the Consumer Staples Select Sector SPDR (NYSEARCA: XLP), the SPDR S&P Retail ETF (NYSEARCA: XRT), and the Merrill Lynch Retail Holders ETF (NYSEARCA: RTH).

Bearish:
Traders who think that the news from the BLS is too weak on good points may want to think about some alternatives:

  • Short the ETFs and stocks listed above, or consider gold as a hedge against disappointing retail and import/export prices as the disappointing figures lead investors out of the market. With thin trading in equities, it seems that investors are more skitterish than the recent stock rally suggests.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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