Morning Report: Decent Data Deceives

(Stocks in this article: NYSE: BSC, NYSE: HBC, Nasdaq: VRSN, Nasdaq: QCOM, NYSE: WEN, NYSE: MT, NYSE: DD)

Today's important economic data proved decent; but was the news deceptively decent? In any event, equities look to follow through on yesterday's rally again today. Beware, however, that tomorrow's CPI data might send a different message, though it's not likely to show up from energy since gasoline prices have only just started to move higher and weather likely delayed heating oil purchases.

Economic Data

October Retail Sales

Sales surprised many today just by meeting consensus. October results rose 0.2% over September's, meeting expectations. However, 0.2% is not robust growth heading into the holiday season. Pressures on consumers do not seem likely to ease either. In fact, they will likely only intensify. Gasoline prices are seen rising as refiners feel pressure from higher input costs. Gas could be 20 cents higher before Christmas, eating into the little spending cash, credit-stretched and limited consumers can handle. While a great majority of our country remains employed, the fact remains that that same majority lives check to check, and is seeing rising cost of living expenditures cut into discretionary cash flow.

October Producer Price Index

October PPI showed a modest 0.1% increase, and no change when excluding food and energy costs. Prices were ironically controlled by a decrease in oil during October, versus September. Clearly, that will show up on the other end of the table in November after oil nearly touched $100. Here's my concern. If commodity price increase is not passed forward, margins should be squeezed. Maybe that is the necessary catalyst for inflation to begin to catch fire. Keep your eye out for that.

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