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Retail Sales

June 11, 2010 – 4:57 pm

We had a great one day rally yesterday and then this morning the market is giving a little back. The cause was the retail sales report because as soon as that report came out, before the opening, the futures which were positive turned down. This report was for May and it showed sales being down 1.2% when the expectation was for it to be up a fraction.

However, looking deeper into the numbers, the weakness can be blamed on building supplies. Sales of those items fell 9.3%. That was a very large drop. The reason is fairly clear as the builders have pulled back their construction starts because of the expiration of the tax benefit to buy homes. In the prior two months building materials were very strong. If you take out gasoline sales, which also fell, and building materials, sales were actually up a fraction in line with expectations.

However, no matter how you parse the report it was the first time in months that retail sales fell.

This of course is more evidence of the weak character of this economic recovery, but don’t we already know that, and hasn’t the market already reacted to that fact? If so, then this poor retail sales report should not be as problematic as the Euro issue and even that issue is starting to fade a bit. Fear is still bubbling and it feels like it’s a good time to be buying.

Good Trading
Steve Peasley

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