Market Comments 7-13-2007

U. S. Stocks-September S&P’s this morning are trading -0.20 points as the market treads water following yesterday’s sharp rally. The stock market is awaiting today’s retail sales and consumer confidence reports for a better fix on consumer spending. The US stock market yesterday rallied very sharply and the Dow posting a record high and the S&P 500 posting a new 7-1/4 year high (Dow +2.09%, S&P 500 +1.91%, Nasdaq Composite +1.88%). Bullish factors yesterday included better than expected sales from Wal-Mart, a new record in US exports, and hopes for a stronger than expected Q2 earnings season. In addition, gasoline prices tumbled to a new 1-week low. Investor and technical buying were features of yesterday’s session since no one wanted to be left out of any new up-leg in the bull market.

Retail Sales – Today’s June retail sales report is expected to be lackluster at -0.1% overall and +0.2% excluding autos. That would follow the very strong report seen in May of +1.4% overall and +1.3% ex-autos. June vehicle sales were already reported at a weak 15.6 mln units, which was a 1-1/2 year low and was down from 16.1 mln units in May. A lackluster retail sales report for June would not be surprising following May’s surge. In general, US consumer spending has held up surprisingly well in the face of various potential threats such as high gasoline prices and rising mortgage rates.

US Consumer Confidence – Today’s early-July US consumer confidence index from the University of Michigan is expected to show an increase of +0.7 to 86.0, reversing some of June’s decline of -3.0 to a 10-month low of 85.3. US consumer confidence in the past 6 months has fallen by a total of 11.6 points from the 2-1/2 year high 96.9 posted in January mainly because of higher gasoline prices and the housing market. Another negative factor more recently has been the 1/2 percentage point rise in mortgage rates. Nevertheless, US consumers continue to spend money and seem to be sanguine about the US economy since the job market remains strong and since stocks are doing well, which helps household portfolios and boosts general confidence.