Three Gray Swans – Week of August 11th – 15th

This week the Gray Swans worth watching are about the consumer and then about prices.

Retail Sales – Shortly after the open Wednesday

The July retail sales figure will be released 30 minutes after the stock market opens on Wednesday. This is a key indicator of consumer spending which is so very important to the US economy. The number (Excluding Autos) is expected to be up 0.3% on a month over month basis which would be the slowest rise in the last six months. If the number is lower than 0.3% there may be cause for concern as the estimate is already relatively low.

Wal-Mart Earnings – Thursday before the market opens

Wal-Mart (WMT) will report earnings before the open on Thursday. This will be a good follow up to the Retail Sales number from the day before, but also may provide more information regarding the health of consumer spending in the US. Possibly more important than the result will be any forward looking statements out of Wal-Mart. The retired retail analyst in me is particularly interested in what they may say about back to school spending. There is some discretion around back to school spending (does Johnny really need a new backpack?) and if it appears weak or strong that may be a nice tell about the rest of 2014 and even an early indication regarding holiday spending.

Producer Price Index – Friday before the stock market opens

The important number (or the one that economists focus on) is PPI excluding food and energy. I know, food and energy prices probably hit the average person harder than the cost of a new shirt, but the excuse to focus on a number that excludes those two sectors has to do with the seasonality and volatility of food and energy prices. With all that being said, the number for June was up 0.2% after dropping 0.1% in May. No inflation to be seen here, yet, so move along. The estimate is for a rise of 0.2%. I keep thinking eventually inflation is going to rear its ugly head so I watch numbers that may give a clue pretty closely.

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…

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