Dow went up 346, advancers over decliners 3-2 & NAZ gained 64. The MLP index rose 1+ to the 228s & the REIT index was off 1+ to 370. Junk bond funds inched higher & Treasuries saw strong buying which lowered yields. Oil added 1+ to the 69s & gold eased back 1 to 1967.
AMJ (Alerian MLP Index tracking fund)
Americans picked up their spending at retail stores in May as inflation showed welcome signs of slowing down. Retail sales, a measure of how much consumers spent on a number of everyday goods, including cars, food & gasoline, rose 0.3% in May, the Commerce Dept said. That is slightly above the 0.1% increase projected, although it is below the 0.4% gain recorded in Apr. Excluding the more volatile measurements of gasoline & autos, sales climbed 0.4% last month. The figures are not adjusted for inflation. "Consumers beat the experts’ expectations once again," said Robert Frick, corp economist with Navy Federal Credit Union. "What’s being underestimated is not just pent-up demand for spending at bars and restaurants and for vehicles, but the continuing desire of Americans to furnish their homes." Consumers spent more on big-ticket items like cars, furniture & home improvement projects. Gas sales slid 2.6% in May as the cost of fuel tumbled. Sales declined in just 2 of 13 retail categories last month. A solid job market & big wage increases have helped to buoy consumer spending. That strong spending, however, could keep inflation elevated, adding pressure on the Fed in its quest to cool the economy & consumer prices. "The upside for retail spending does have a downside, however, in the form of continued inflationary pressure," said Ben Ayers, Nationwide senior economist. "Higher interest rates haven’t tamped down consumer demand enough to meaningfully slow price growth, especially on the services side of the economy. These hot trends for consumers could lead to another interest rate hike by the Fed in July."
Retail sales rise again as inflation shows signs of cooling
Small business owners are concerned about the economy for the 17th month in a row, according to a National Federation of Independent Business (NFIB) report. Inflation was the biggest problem for 25% of small business owners in May, up 2 points from Apr. Concern about labor quality followed close behind at 24%, with 44% of owners reporting difficulty filling job openings. The year-over-year US inflation rate was 4.05% as of May 31, compared to 4.93% in Apr & 8.58% in May 2022. Since the beginning of Pres Biden's administration, prices have gone up 18.3%. The Biden administration has overseen the highest overall presidential inflation rate, 15%, since Jimmy Carter's presidency. "Small business owners lack optimism about future economic conditions due to numerous reasons that create uncertainty, including worker shortages, supply chain issues, inflation and threats of tax increases from Washington," Jon Thompson, NFIB communications director, said. Small business owners expecting better business conditions over the next 6 months declined one point from Apr to a net negative 50%. NFIB's Small Business Optimism Index increased 0.4 points in May to 89.4. This marks the 17th consecutive month optimism about business conditions has remained below the 49-year average of 98. Dec 2021 is the last time the index was at or above the average on the optimism index. The net percent of owners raising average selling prices remains at the inflationary level of 32%. The net percent of owners who expect real sales to be higher dropped 2 points from Apr to a net negative of 21%. While 63% of owners reported hiring or trying to hire in May, almost 90% said they found few or no qualified applicants for the open positions. A seasonally adjusted net 19% of small business owners said they plan to create new jobs in the next 3 months. A net negative of only 8% of all owners reported higher nominal sales in the last 3 months. The net percent of owners expecting higher real sales volumes saw a 3-point decrease to a net negative of 21%. "Washington can take multiple steps to increase optimism by focusing on promoting economic growth and providing certainty, such as permanently extending the Small Business Deduction and abandoning any plans to raise taxes on small businesses," Thompson said.
Report: Inflation leads concerns of small business owners
North America's top corp finance execs anticipate a downturn across each of the world's regional economies over the next year, according to new data from Deloitte. The global consulting & risk management firm released the results of its quarterly CFO Signals survey, which found respondents have a more pessimistic view of 2024 in Q2 of this year than they did in the first. "CFOs are increasingly concerned with the economic environment as they grapple with inflation and high interest rates," Deloitte's Global & US leader of the CFO Program, Steve Gallucci, said. "Trade conflicts and Russia’s invasion of Ukraine were pervasive concerns for CFOs over the last calendar year, and geopolitical issues are still commonly cited risks," he said. "However, banking shocks and the Fed's prior rate increases may have CFOs more focused on the economy." Deloitte's survey also found CFOs are being directed by their CEOs to focus on cost-reduction measures. Some 33% of respondents said now is a good time to take risks, down from 40% in Q1. Fewer CFOs expressed optimism about their own companies' financial outlooks, too. In another noteworthy shift, talent & labor concerns dropped as CFOs' top internal risk after 9 consecutive qtrs in favor of execution risks to their strategies or transformations. While 80% of respondents still pointed to talent among their most worrisome internal risks, execution risks edged it out of the top spot at 81%, indicating that CFOs are slightly more concerned with successfully executing their strategic priorities. The survey also asked CFOs about the most significant challenges to managing enterprise risk & regulatory compliance, &, overwhelmingly, the top challenge cited was "changing or increasing regulations and working with regulators." "Businesses are navigating a complicated economic and regulatory environment, and developments in both areas are weighing heavy on their business and economic outlook," Gallucci explained.
CFOs expect economy will be worse in a year, Deloitte survey finds
With today's rally, Dow is at a more than 1 year high. But it is also about 3K below its high 2 years ago. Retail sales data is encouraging although it will remind the Fed that more work is needed to fight inflation. The recent stock market rally may be overdone.
Dow Jones Industrials
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