Retail Numbers Can Be an Important Leading Indicator You can Use
Traders paused on Thursday as the Dow Jones Industrial Average (.DJI) dropped more than 30 points by early afternoon. Besides the jobs and unemployment reports, investors are growing concerned about continued stagnation in retail sales. The retail reports today will make the results from the Wal Mart (WMT) report next week much more important.
Costco (COST) reported that sales were down 7%. Even when adjusted for gasoline sales the numbers were still below investor expectations. Similarly, Target Corporation (TGT) was down on news that sales are off 3.2% in July. These reports represent some of the mixed numbers we are seeing from this sector. Taken as a whole, it is clear that retail sales are still far from recovering.
Retail Sales Forecast Profits, GDP and Changes in Unemployment
Learn more about how retail sales numbers from individual firms as well as the official government statistics can be used as a forecasting tool for a number of possible economic changes. You can use this data to plan how aggressive you want to be in your stock investments.
However, be careful because sales news like this is not a perfect forecasting tool when looked at by itself. In fact, taken by themselves, each earnings report has limited meaning. You can learn more here about why an individual news announcement will have an almost random effect on prices when looked at by itself.
Ultimatley retail sales, like other earnings-related announcements, can be accompanied by a lot of price volatility. While price direction may be uncertain increased price movement is fairly reliable. If you are a risk taker you can take advantage of that movement with options. Learn more about how to use option straddles and strangles near earnings announcements here.
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