A FT article reported that the United States could lose its AAA credit rating which helped spur risk aversion during overnight trading but the focus will now turn toward the upcoming advance retail sales report.
[B]What To Watch For In The US Session
• Retail Sales Ahead
• U.S. Triple A Rating Questioned
• Chrysler Bankruptcy To Take Two Years
[/B][U][B]A Surprise Gain in Retail Sales Could Reignite Bullish Sentiment[/B][/U]
A FT article reported that the United States could lose its AAA credit rating which helped spur risk aversion during overnight trading but the focus will now turn toward the upcoming advance retail sales report. Consumer consumption in April is expected to have remained flat following a 1.2% drop the month prior. The U.S. consumer has become increasingly optimistic evidenced by the rise in the University of Michigan consumer sentiment reading to 65.1 from 61.9 which could translate into an increase in spending. There is a lot of built up demand and we may start to see it flow through over the next few months. Looking at last month’s breakdown we see evidence of this as electronic and apparel sales fell 5.9% and 1.8%. These are volatile sectors and sharp falls are typically followed by a rebound. Indeed, the last two times demand for electronic goods fell by more than 5% the following month saw at least a 7% rebound. Therefore, an improvement in domestic demand would add to increasing optimism and send stocks higher. A Bloomberg report suggested that the Chrysler bankruptcy could take as long as two years versus the tow month suggested by the President Obama. That would weigh on automakers and related companies.
[B]Dow Jones 8469.11[/B]
The DJIA futures have remained in negative territory throughout overnight trading and if we see a weak retail sales report, we could be looking at a triple digit decline at the open. Also, weighing on global sentiment is the BoE quarterly inflation report where the central bank predicted that credit markets will remain tight and lead to a protracted recovery.
[B]NASDAQ 1715.92[/B]
The Nasdaq was under the most pressure yesterday as consumer related name were sold ahead of the retail sales report. Therefore, an unexpected gain in consumption could lead those sectors reversing and lead the tech laden index higher.
[B]S&P 500 908.35[/B]
The S&P 500 will also see its price action dictated by the retail sales report as it will set expectations for domestic demand going forward.
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Current Snap Shot[/B][/U]
