Another Leg Of The Rally?
Could well be. Today’s extension of the rally was on the back of retail sales figures. Retail sales rose 1.4% in October vs. 0.9% consensus and 1.5% decrease in September. Retail sales ex. autos rose 0.2% vs. 0.4% consensus and 0.5% growth in September. Obviously the low base in September reading (cash-for-clunkers ended in August) was the reason for positive reading. The “core” number came bellow consensus. I don’t see anything to cheer about here, but the markets seem to have a different view.
Empire State index came out at 23.51 vs. 29 consensus. Consumer confidence came at 66 vs. 71 consensus. A streak of worse than expected leading indicator readings continue.
Japan Q3 GDP grew 4.8% vs. 2.8% consensus. Big number. Large contribution by public spending and exports.
Interesting observation on earnings by David Rosenberg of Gluskin Sheff + Associates:
…S&P 500 operating earnings are coming in north for $15 for Q3, a quarter in which GDP growth came in at a 3.5% annual rate. Few believe we will sustain that growth rate but think about it for a second, the best we could do with 3.5% growth was an annualized earnings figure of $60 for operating EPS….
Must highlight the fact he is talking about operational earnings. P/E of 18.3; approximately a 30% premium on long term average this early in cycle.
S&P 500 has hit another high for the year, commodities are up, dollar is down (don’t know why, if equities are trading higher on good macro figures). Gold is up. Puzzled.