Retail sales to influence Wall Street this week

Published: June 7, 2015 9:01 a.m. ET

Voltage Pictures/Courtesy Everett Collection
Investors will be looking to retail sales data for clues on how well the economy is doing.


Markets reporter

With high-profile corporate earnings in the rearview mirror and the Federal Reserve’s monetary policy meeting still more than a week away, the action in the market will be mostly data-driven with retail sales attracting the lion’s share of investors’ attention.

All three stock indexes were down in the past week with the S&P 500 SPX, +0.06%  posting a weekly loss of 0.7%, the Dow Jones Industrial Average DJIA, +0.19%  off 0.9% and NASDAQ Composite Index COMP, -0.08%  edging down fractionally.

“It [will be] all about retail sales. The consumer has been the weak spot recently, and we believe the softness we have seen in consumer spending is temporary. In particular, it is difficult to see consumption stay weak when the economy is creating 280K jobs and wages are trending higher,” said Torsten Slok, chief international economist at Deutsche Bank Securities.

Retail sales in May are projected to rise 1% on the back of auto sales, recovering from zero growth in April. U.S. car and light truck sales rose to a seasonally adjusted annual rate of 17.8 million units in the past month, the highest since July 2005, The Wall Street Journal reported.

Retail sales are likely to have picked up in May.

“Retail sales are likely to come in strong since payroll numbers were good,” said Bill Stone, chief investment strategist at PNC Asset Management Group.

With wage increases on top of lower oil prices, American consumers will have quite a bit of pent-up buying power, he added.

Friday’s robust jobs data may have also bolstered the Federal Reserve’s case for an interest rate hike later this year, notwithstanding pressure from the International Monetary Fund to stand pat until 2016.

Economists now believe that while it may be too soon for the Fed to move next week, the odds of an interest-rate increase in September are higher.

Aside from U.S. economic data, Greece is expected to continue casting a shadow over the market as it attempts to work out a deal to secure much-0needed funds. Greek Prime Minister Alexis Tsipras is under pressure to strike a compromise between meeting the country’s creditors’ demands for more austerity measures and the ruling Syriza Party’s hard-liners who are expected to balk at the harsh terms.

China’s trade data, due Monday, could also have some effect on the stock market’s direction if they signal a further slowdown in the Asian powerhouse.

Still, there is a good chance of a rebound in the stock market, particularly if U.S. data continue to indicate that the economy is on the mend.

“Stocks are pretty flat but with little more evidence of the economy firming up, I think there is a good chance of a bounce,” said Stone.

On the earnings front, there are only a couple of notable names scheduled to announce results.

Sears Holdings Corp. SHLD, -0.69%  is expected to report a loss of $2.59 a share on revenue of $6.08 billion.

H&R Block Inc. HRB, +0.19% also slated for Monday, is projected to post fiscal fourth-quarter earnings of $2.68 a share on revenue of $2.3 billion.

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Sue Chang is a MarketWatch reporter in San Francisco. You can follow her on Twitter at @SueChangMW.

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