{"id":210414,"date":"2024-08-15T12:57:32","date_gmt":"2024-08-15T16:57:32","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=210414"},"modified":"2024-08-16T13:48:58","modified_gmt":"2024-08-16T17:48:58","slug":"stock-bulls-and-bond-bears-yell-no-recession-at-the-party","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/stock-bulls-and-bond-bears-yell-no-recession-at-the-party\/","title":{"rendered":"Stock Bulls and Bond Bears Yell \u201cNo Recession\u201d at the Party: Aug. 15, 2024"},"content":{"rendered":"\n

Market participants are screaming \u201cno recession\u201d as they aggressively scoop up stocks following this morning\u2019s strong corporate earnings releases and robust economic data. Walmart\u2019s beat and raise alongside a significant surge on retail sales are indicating that the economic cycle has legs. Furthermore, news that the labor market strengthened in the past two weeks, according to initial and continuing unemployment claims, is propelling confidence that the consumer, despite confronting tough budgetary choices, can continue to power business revenues in the foreseeable future. Yields and the dollar are jumping against this backdrop, however, as sturdy activity does collect its tolls via apprehensive central bankers and taller inflation expectations.<\/p>\n\n\n\n

Off in June, but on in July<\/h2>\n\n\n\n

Households have been managing the headwinds caused by towering stickers, airy interest rates and reduced credit availability by transitioning their spending like a light switch. Particularly, they are splurging in certain months while stalling their consumption in others. July definitely proved to be a party: retail sales surged a whopping 1% month over month (m\/m), trouncing expectations calling for 0.3% and recovering from June\u2019s 0.2% decline.  As we can see, the light switch was on last month but off in June. Results excluding automobiles and gasoline were also favorable, with the adjusted measures without the former and without the two categories both increasing 0.4% during the period.<\/p>\n\n\n\n

\"Retail<\/figure>\n\n\n\n

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Shopping pattern strength was broad-based across components, with 10 out of 13 segments reflecting growth. Folks ramped up their spending at car dealerships and mechanic shops, electronics and appliance destinations, building materials and equipment stores, supermarkets, health and personal care retailers, furniture showrooms and general merchandise establishments with the categories seeing transactions increase 3.6%, 1.6%, 0.9%, 0.9%, 0.8%, 0.5% and 0.5% on a m\/m basis. Meanwhile, restaurants and drinking parlors, ecommerce and gasoline stations saw revenues increase 0.3%, 0.2% and 0.1%. Consumers did take a break from miscellaneous retailers, sporting goods stores and apparel shops, however, as the fragment\u2019s saw sales slip 2.5%, 0.7% and 0.1%. <\/p>\n\n\n\n

Reduced Layoffs Inspire Confidence<\/h3>\n\n\n\n

Turning to the labor market, developments were favorable in the past two weeks as corporate layoffs were tempered. Initial unemployment claims fell to 227,000 for the week ended August 10, beneath projections of 235,000 and the prior week\u2019s 234,000. Telling a similar story were continuing claims for the week ended August 3, which declined to 1.864 million, below the median estimate of 1.880 million and the previous period\u2019s 1.871 million. Four-week moving average trends did move in bifurcated fashion though, with initial claims dropping from 241,000 to 236,500 and continuing claims rising from 1.861 million to 1.862 million. <\/p>\n\n\n\n

\"Unemployment<\/figure>\n\n\n\n

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Homebuilders Don\u2019t Share Consumers\u2019 Optimism<\/h2>\n\n\n\n

Homebuilder sentiment weakened this month despite construction folks feeling upbeat about transactions in the approaching six months. The NAHB\/Wells Fargo Homebuilder Sentiment index dropped to 39 in August, which is disappointing considering that the Street expected an increase to 43 from July\u2019s 41. The single-family sales in the present and prospective buyer components weighed the most, slipping to 44 and 25 from 46 and 27, but the outlook for single-family transactions in the next six months climbed a point from 48 to 49. Finally, no region showed progress this month, with the Northeast and South dropping to 46 and 39 from 47 and 43, while the Midwest and West held steady at 39 and 37. The contraction-expansion threshold is 50.<\/p>\n\n\n\n

\"National<\/figure>\n\n\n\n

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Walmart Scores and AI Delivers but Ag and Construction Spending Languish<\/h2>\n\n\n\n

Walmart is continuing to benefit from consumers seeking bargains in response to inflation crimping their budgets, while global spending on construction and agriculture equipment continues to sag. On a positive note, Alibaba says its artificial intelligence services have generated strong revenue growth. Consider the following earnings highlights:<\/p>\n\n\n\n