Wednesday, August 15, 2012

US Equities Strengthen on Retail Sales Growth

US equities ended unexpectedly higher yesterday as the best retail sales growth in five months and optimistic consumerrelated earnings data were released.

The Dow Jones Industrial Average index climbed higher by 2.51 points, or 0.02%, to close at 13,172.14, while the S&P500 index waned 0.18 of a point, or -0.01%, to close at 1,403.93.

US retail sales soared in July by the largest in 5 months. Retail sales figures rose 0.8% month-on-month, against a market estimate of +0.4%, somewhat balancing out the previous three consecutive months of declines.

Gains in the retail sales sector were apparently broad-based. All key areas of the sector delivered growth, with a 1.1% gain at furniture stores and a 1.0% increase in building materials. Restaurants, auto-dealers, electronics shops and online stores also booked concrete earnings.

US business inventories rose in June. Inventories inched higher by 0.1%, against a market estimate of +0.2%, to a seasonally adjusted $1.580 trillion. On the other hand, sales fell 1.1% to a seasonally adjusted $1.230 trillion.

Retailers reportedly increased stockpiles by 0.6%, partially due to surges in motor vehicle and clothing inventories. The amount of goods on hand in relation to sales moved slightly higher to 1.29 in June, the highest figure since February 2010.

US Treasury bond prices dropped as optimistic retail sales reports weakened demand for safe-haven securities. The twoyear note yield gained 0.8bp to 0.273%, while the 10-year bond yield leapt 6.5bps to 1.729%.This material, which is strictly for information purposes only, is for your sole use, does not constitute a recommendation or an offer to sell or a solicitation to buy any financial product.