Mid-Market Update: Stocks rally on Retail Surprise and earnings, Sentiment lags, King Goldman

US stocks are rising after better-than-expected retail sales data, optimism that the risks from Evergrande’s defaults will be contained, and after the first week of earnings season mostly impressed.

Retail Sales

Wall Street was expecting a slowdown in spending, but it turns out the US consumer is not to be messed with.  Back-to-back months of better-than-expected retail sales data shows the consumer looks strong heading into the holiday season.  Everyone was expecting a dip in auto sales as the automakers show a drop in car sales, but that did not happen in this report.

Retail sales might moderate next month, but early holiday is happening and Americans seem poised to spend big this holiday season.  With supply chain issues nudging people to shop early and with Chanukah starting late November, retail sales should remain robust going into year end.

The volatile Empire State index posted a sharper drop in October.  Business activity is still healthy, but widespread price increases still show no signs of easing.  The economy is still strong and the outlook for manufacturing remains upbeat.

Consumer Sentiment

The University of Michigan consumer sentiment report showed conditions are unfavorable on supply chain issues, a messy labor market recovery, and the inability to get things done in Washington DC.   The headline sentiment came in at 71.4, lower than the estimate of 73.1 and prior reading of 72.8.  Inflation expects diverged a little as 1-year expectations rose  to 4.8%, while 5-10year expectations dipped to 2.8%.

Goldman

Goldman Sachs is the winner of the first week of earnings season.  Goldman just leaped over Morgan Stanley in equity trading revenue, and it was across the board beats that had Wall Street buzzing.   Goldman’s blew away all the consensus estimates.  Equity sales and trading revenue grew by $3.1 billion, much higher than the $2.21 billion estimate.  Investment banking strengthened by $3.55 billion, well above the $2.85 billion estimate.  Deal making impressed at $1.65 billion, a beat of the analysts’ consensus estimate of $1.22 billion.  Profit soared by 60% in the third quarter which is why Goldman shares shattered the $400 ceiling.

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