Investors zero in on health of consumer with retail sales, earnings
By Lewis Krauskopf
NEW YORK (Reuters) — Investors in the coming week will get a look at the state of U.S. consumers — whose spending drives around two-thirds of the economy — with a U.S. retail sales report and earnings due from Procter & Gamble (NYSE:PG), Netflix (NASDAQ:NFLX) and a slew of banks.
Durable consumer spending has been a key reason for the economy’s resilience in the face of higher interest rates, with a better-than-expected economy supporting stocks this year. The S&P 500 is up about 13% year-to-date, though it has retreated roughly 6% from highs reached in late July.
Retail sales data, due out on Tuesday, may have to walk a tightrope to satisfy investors. A number that is far stronger than expected could stir fears of a rebound in inflation and bolster worries that the Federal Reserve will need to keep rates elevated for longer.
Conversely, a weak number could reignite concerns of an economic downturn that the U.S. has so far managed to avoid, despite the Fed raising borrowing costs to their highest levels in decades.
“It’s hyper-important to us because that’s really what has been resilient in this economy," said Art Hogan, chief market strategist at B Riley Wealth. «We really want to see what consumers are doing versus what they’re saying.”
Retail sales are expected to have risen 0.3% on a monthly basis in September, according to economists polled by Reuters.
As third quarter earnings season heats up, investors are also on guard for signs that the conflict between Israel and Hamas is widening. Investors headed to safe-haven assets such as Treasuries and gold on Friday amid worries the conflict could intensify over the weekend.
There have been some signs that consumer strength may be wavering. A
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