Stocks Slump As Otherwise Tame Inflation Report Shows Housing Flare-Up

Early stock indicators point lower, remaining there after a report showed U.S. consumer prices edged up marginally last month but included a jump in housing costs that could help explain limited spending elsewhere. Expensive shelter also raises some concern for inflation flares.

As for that elusive consumer, they did shop at Target. Target’s upbeat earnings and guidance renewed hope for consumer spending. Target’s release followed mixed earnings from Home Depot Inc HD, which did well, and Walmart WMT, which disappointed, on Tuesday. The consumer remains a big question mark for investors and the Federal Reserve. In fact, the stock market’s major focus is likely to stay fixed on the mid-afternoon release of the Fed’s July meeting minutes. Listless trading could continue until then.

CPI Tame, But Not Housing. The consumer price index (CPI) rose a negligible 0.1 percent in July to mark the smallest increase in three months. Yet the cost of housing, the largest expense for most Americans, continued to rise. In this report, the price of shelter posted its biggest increase in more than eight years, up 0.4 percent in July. And housing expenses have climbed 3.1 percent in the past 12 months, the largest annual increase since 2008. Excluding food and energy, so-called core consumer prices also advanced 0.1 percent in July, about in line with Street expectations. Prices for clothes and medical care also rose.

Raised Guidance at Target. Target Corporation TGT lifted its profit outlook for the year after beating Street expectations with Q2 results. The big-box retailer logged its fourth straight quarter of same-store sales growth and has been under renewed scrutiny as new management cleans up from a security breach and an expensive Canada exit. Target has also shored up its focus on digital sales as it competes with Amazon.com (AMZN) and others. TGT now expects earnings of $4.60 to $4.75, compared with its prior guidance of $4.50 to $4.65 a share. For the current quarter, Target forecasts earnings of $0.79 to $0.89 a share. Analysts polled by Thomson Reuters had forecast $0.86 a share.

This article was written by J.J. Kinahan.

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2015 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.