Retail Sales Come In Soft After Fiscal Stimulus Lapses; Dow Jones Futures Pare Gain

Excluding auto sales, retail sales rose 0.7% from July and 2.1% from a year ago. Wall Street expected an overall rise of 1%, both overall and minus autos. Also disappointing, revisions pushed July retail sales down to a 0.9% monthly gain from the initially reported 1.2% rise.

The retail sector has benefited from the shift of funds from service sectors, which have borne the brunt of coronavirus fears. While retail sales continued to come back in August, a big cut to unemployment benefits at the end of July may have hurt. Pent-up demand also may have been mostly spent by now.

President Trump’s executive orders to provide some payroll tax relief and maintain some boost to unemployment benefits did little cushion the loss of $600 in weekly unemployment benefits. But Trump’s order to add back at least $300 in weekly benefits should support consumption in September.

Dow Jones, Treasury Yield Reaction

After the retail data, Dow Jones rose 0.5% in early Wednesday stock market action. S&P 500 futures added 0.6% and Nasdaq 100 futures 0.45%.

The two-day Federal Reserve meeting wraps up today with a 2 p.m. Eastern Time policy announcement and 2:30 p.m. press conference.

The 10-year Treasury yield ticked down about 2 basis points to 0.66% after the retail sales report.

Retail Sales Details

The best category: Sales at food service and drinking places rose 4.7% on the month, but still fell 15.4% from a year ago.

The worst category: Sporting goods, book and hobby store sales fell 5.7% on the month, while still rising 11.1% from a year ago.

Nonstore retailers led by Amazon (AMZN) saw sales stay flat vs. July but rise 22.4% from a year ago. With more brick-and-mortar stores open, online sales are no longer surging, but are still well above pre-pandemic levels.

Clothing store sales grew 2.9% in August, but remained 20.4% below year-ago levels.

General merchandise store sales slipped 0.4% from July, while rising 0.8% from a year ago. The department store subcategory saw sales fall 2.3% on the month and 16.9% on the year.

Leading Retail Stocks

The IBD 50 list of market-leading stocks includes Lowe’s (LOW), Big Lots (BIG), Amazon and Dollar General (DG).

Amazon stock and Chipotle Mexican Grill (CMG) are on IBD Leaderboard.

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