The US stock exchange bounced back at today’s open after three straight days of losses.
Friday, December 12, 2014
Falling oil prices have begun to affect retail data in a positive way – a new report from the Commerce Department indicated retail sales grew in November by the largest amount in eight months, while unemployment claims fell.
The S&P 500 opened 0.4% higher; the Dow added 0.3% and the Nasdaq gained 0.5%. The gains followed Wednesday’s setback, as the S&P 500 decline the most in seven weeks and benchmark equity gauges for all 10 industries declined at least 1%.
“When you see a big decline like we did yesterday we’re poised for a little bit of a bounce back and retail sales are helping,” Larry Peruzzi, director of international trading at Cabrera Capital Markets LLC in Boston, told Bloomberg. “Globally, we’re still one of the bright spots. Retail sales are always an indication that consumers are feeling good.”
Retails sales point to a stronger economy
The Commerce Department reported that retail sales added 0.7% in November from the month prior – the biggest increase March, according to The Wall Street Journal. Analysts expected some sort of rise with the beginning of the holiday season – a Wall Street Journal survey of economists predicted a 0.4% rise. But retail sales were also boosted by lower gasoline prices and strong job growth.
Car and auto-parts purchases were 1.7% higher in November, leading the way for sales. Every major retail category increased except for gasoline, as prices have fallen more than a dollar since the summer. Although revenue at service stations is down, the lower gas prices should be a boost for sales in the long-term by increasing Americans’ confidence and discretionary income.
Consumer spending is the biggest driver of economic growth. The US economy expanded at an annual rate of 3.9% in the third quarter after growing at a 4.6% pace in the second quarter. Economists expect growth to diminish to somewhere between 2% and 3% in the fourth quarter, despite stronger consumer spending and healthy job growth. Those analysts point to lower exports, higher imports and more government spending as dampeners.
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