Fears of a stock market crash swirled early this morning in the face of weak retail sales. What’s behind today’s volatile stock movement?
Well, as per this morning’s retail sales data, it’s clear consumer spending — while still up for its third-straight month — slowed notably in June. Indeed, retail sales rose 0.2% in June from May, below the Wall Street consensus estimate of around 0.5%.
Sales excluding auto and gas, on the other hand, increased 0.3% over the same time period, in line with projections. Interestingly, May’s retail sales were also revised from 0.3% to 0.5%, an optimistic sign for the U.S. economy’s resilience.
“While they continue to spend, the June retail sales report suggests that consumers are becoming more thoughtful with their purchases,” noted Oxford Economics Lead U.S. Economist Oren Klachkin. “Altogether, the data indicate that consumer spending propelled the economy at a softer pace in Q2 relative to Q1.”
Retail Sales Growth Slowed in June
As Yahoo Finance reports, seven of the 13 major spending categories increased from last month, with Furniture and Electronics leading the pack, respectively climbing 1.4% and 1.1%. What’s more, “Growth at non-store retailers, which includes online sales, helped keep total sales higher than the month prior with a 1.9% increase from May.”
Meanwhile, department stores slipped 2.4% while gasoline stations fell 1.4% in sales. Grocery store sales also recorded a drop of 0.7%.
According to Thomas Simons, U.S. Economist for Jefferies:
“The details are fairly encouraging overall, but we still remain of the view that the consumer is slowing down […] Were it not for the Social Security-fueled jump in January, the first half of this year would look fairly subdued. Consumers are facing tougher choices when it comes to spending, now that they have their biggest incentive to rebuild and increase their savings in decades.”
Stock Market Crash Fears Ease After Early Morning Trading
Retail sales are likely the primary cause behind today’s stock market action. While most major indices slipped early in the day, at the time of this writing, nearly every stock market index is in the green.
The S&P 500 is up 0.4% currently while the Dow 30 is enjoying gains of about 1%. Meanwhile, the Nasdaq Composite is up about 0.5%.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
