US Close: Stocks pop on impressive US data, American Consumer is still strong

US stocks rallied after an impressive retail sales report, solid industrial production data, and retail earnings showed the consumer is handling the current pricing increases. All signs are pointing to a very strong holiday season for retailers and that should help keep sending stocks higher. Financial markets are fixated on inflation, but now agree that it can get a little uglier over the next couple of months, before traders get unnerved.

The Nasdaq outperformed as today’s risk-on tone was accompanied by steadying Treasury yields, a boost to Chinese stocks Alibaba and Baidu, and as Wall Street embraced the EV trade.

Retail Sales

The US consumer shrugged off higher prices and opened their pocketbooks in October. Sales at US retail stores surged by a seasonally adjusted 1.7% in October compared with the previous month, higher than the consensus estimate of 1.0%. The jump in online sales is a good sign that holiday shopping will be very strong this season. Everything is being bought as the American consumer spends the leftover stimulus money in their bank accounts.

This retail sales report contradicts last week’s consumer sentiment reading that hit a 10-year low. Complimenting today’s retail sales report was solid earnings from Walmart. The key takeaway from Walmart is that consumers are still very strong as they are both spending and shopping more. Home Depot also posted robust results that show the homeowner is still not done fixing up their home.

Industrial Production

Both industrial and manufacturing production readings showed better-than-expected gains in October as companies showed improvement over getting their hands on supplies. The prior month’s report was dragged down by Hurricane Ida, so the improvement will be taken with a grain of salt. If factory output continues to rise in the coming months despite higher energy prices, growth forecasts for 2022 will need to be upgraded.

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