Can Retail Sales Numbers Sooth Nerves About Retailers? Data May Tell

The market’s seesaw week continued Thursday, with major stock indices climbing slightly after Wednesday’s sharp losses. New 2016 highs in the crude oil market seemed to help equities regain some ground as investors looked ahead to key data due Friday.

It’s been an up-and-down week, with the market rallying sharply on Tuesday, plummeting Wednesday, and moving a bit higher in the early going Thursday as investors await Friday’s key retail sales and Producer Price Index (PPI) reports. Expectations are that retail sales, excluding automobiles, climbed 0.5% in April after a 0.2% rise in March, according to Briefing.com. Auto sales were strong in April, and the consensus estimate for retail sales with autos included is 0.8%.

The consensus estimate for core PPI is 0.1%, Briefing.com said. Core PPI fell 0.1% in March.

Looking back at Wednesday’s sell-off, it’s not simply a case of everyone running for the doors. One really big stock, The Walt Disney Company DIS, weighed on the market after reporting disappointing results. So did a couple of smaller names. The steep losses Wednesday also seemed to reflect sentiment that Tuesday’s gains might have been overdone.

More of the concern on Wednesday might have been Macy's Inc M, which lowered its outlook. The Macy’s news was the latest in a continuing conundrum about what's going to happen to brick and mortar stores going forward. These companies are having a tough time and that’s being reflected in their earnings. Thursday after the close comes Nordstrom, Inc. JWN earnings, and on Friday morning investors get a look at retail sales. Then there may be more clarity about the state of retail, as well as the consumer.

There was more negative news from the retail sector early Thursday, as Kohl’s Corporation KSS reported a same-store sales drop of 3.9%. Its shares fell sharply in pre-market trading.

Though the focus is on Friday’s retail sales and PPI, there are some data points Thursday, including import and export prices and natural gas supply. Weekly initial jobless claims Thursday came in well above estimates at 294,000, a 14-month high. Consensus had been for 270,000. It was the third week in a row of rising claims.

Home on the Range? Despite some brief rallies and downturns, notably Wednesday’s sharp decline, the S&P 500 index (SPX) remains in a narrow trading range that’s lasted nearly a month. Since April 20, when the index closed just above 2100, it’s closed between support at 2050 and resistance at 2100 every trading day. What would it take to get the market out of this range? Well, the jobs report last week didn’t provide enough incentive, it seems. Retail sales this Friday loom large, but it remains to be seen whether that can cause any big moves one way or another. The CBOE’s VIX index, a closely watched indicator of market volatility, fell below 14 early Wednesday, down from highs above 16 earlier this month, but then zoomed back up later in the day as stocks fell and finished well above the 14 level.

Surprise Inventory Draw Sends Oil to New 2016 Highs: The weekly U.S. stockpile report from the Energy Information Administration (EIA) Wednesday showed a surprise 3.41 million barrel decline in crude inventories, the first drop since March. U.S. oil futures, which had been nearly flat earlier in the day, bounced on the news and rose to new highs for the year above $46. But keep in mind that even with this week’s fall in stockpiles, supplies remain near record highs and well above where they were a year ago at this time. One thing to watch: Gasoline inventories fell, and the U.S. is approaching summer driving season, when gas use tends to be highest.

Energy 2040? Still Dominated By Fossil Fuels: The EIA also released a long-term energy outlook Wednesday, predicting that the world’s energy use could rise 1.4% a year between now and 2040, or 48% cumulatively. Renewable energy use is predicted to grow even faster, at a 2.6% annual rate. Though renewable energy is expected to play a larger role in coming years, the EIA forecasts fossil fuels continuing to supply more than 75% of the world’s energy in 2040. Looking more closely, the EIA sees natural gas surpassing coal as the world’s second-largest energy source (after oil) by 2030. In 2012, coal provided 40% of the world’s total net electricity generation. By 2040, coal, natural gas, and renewable energy sources could provide roughly equal shares (28-29%) of world generation, the EIA said.

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