Pre-Market - Retail Sales Sputter

By "The Greek"

The premarket report is back. The provider of your most important financial market navigation tool, "The Greek's Week Ahead," will resume publishing of our pre market reports as of today. We expect this concise summation of the market moving news of the day, with value-added insight, will help you navigate through the trading day and understand the market factors at the opening.

(Article interests AMEX: DIA, AMEX: SPY, AMEX: DOG, AMEX: SDS, AMEX: QLD, Nasdaq: QQQQ, NYSE: NYX)

Economic Data

Retail Sales (July)

Retail sales fell for the first time in five months, falling 0.1% in July, missing consensus expectations for no change (according to Bloomberg's survey). Sales were impacted by poor auto sales. Excluding autos, retail sales rose 0.4%, still short of expectations for an increase of 0.5%.

There's no surprise here, since we knew the automobile market was tanking early in the second quarter, thanks to the troubling talk coming out of Detroit's HQ offices. With stimulus running dry now, retail should only get worse, meaning a tough holiday season and rising unemployment. And the folks in retail are not ready for layoffs, meaning that six month store of money you're suppose to have in case you lose your job is just not there. This portends further foreclosure trouble and an even more tightening of consumer spending. These are also the folks who spend most freely, no matter how well-advised they are about where the best sales are.

Macy's Results

Macy's reported July-Quarter earnings of $0.17, before items, two cents short of consensus expectations. Operating within the struggling department store segment, Macy's claims to be gaining market share on weaker competitors. Still, we doubt that matters to shareholders right now, as the retail trade industry allows portfolio managers options that extend beyond department stores. Macy's (NYSE: M) shares are lower some 3.8% in premarket activity as a result. Same-store sales sank 2.1% in the quarter.

Macy's promises a new strategy for the upcoming holiday shopping season, which it believes will present a compelling option. The company is incorporating toy marketer FAO Schwarz in up to 275 Macy's stores this year. M also says its localization initiative is on track. We must admit to not having read about the initiative, but it sounds to us like Macy's has New York on the brain. It's NYC store does a mega business on the shopping of tourists, especially foreign ones these days, and this localization strategy sounds to us like a way to boost sales by appealing to locals.

The problem is that no matter how important that NYC store is, Macy's lives and dies by the actions of the rest of the country. That said, the company seems to benefit from its direct mailing efforts that appeal to locals, and this would work across the country. (Maybe we'll take a closer look for you today)

"Yes Virginia, there is a Santa Claus, but he's not coming here this year."

In any event, we've started seeing signs of weakness in even the retail stalwarts at Wal-Mart (NYSE: WMT) and Costco (Nasdaq: COST), and Target (NYSE: TGT) has been troubled for months now. Yes Virginia, there is a Santa Claus, but he's not coming here this year...

Russia Blatantly Violating Truce Agreement and the Voice of the World

Russia's political action in Georgia exposes long-standing ignorance to world opinion, and Russia's ego is just plain getting old if you ask me. If not for its store of Soviet era nuclear weaponry, we're sure by now Russia would have been set straight. It's a shame Russia's leadership is more reminiscent of Joseph Stalin than it is of the scores of poets, scientists, performers, artists, philosophers who have offered so much to global society. (Tell us more about the great Russians that come to mind - comment below)

Georgia's President Saakashvili, with shaky voice and beaten bravado, is claiming that Russia has already violated its own truce. He states that Russian troops have once again engaged Georgians in Gori, and have even moved deeper into Georgian territory. This while Georgia's ports are reportedly operating normally. We have no reason to doubt Mr. Saakashvili, who we have found relatively on the side of righteousness, even when he lies for his country's sake. In other words, when you're dealing with animals, sometimes you have to treat them like wild animals. I think a great man once said something about the risk of giving pearls to swines, lest they trample them and tear you to shreds. Georgia, and the world, faces a great swine in the Kremlin.

Oil, Dollar and Data

Oil is rising in early trading, on the back of recent declines and ahead of data that is expected to show a small build in inventory in this morning's Petroleum Status Report. The outlook for the dollar has grown mixed here, and so oil is wavering back and forth. Momentum traders are leaning lower still, in our view, but the geopolitical factor overhangs, and we're not talking about Georgia/Russia (Read IRAN). We see oil softening further, the dollar strengthening further, and it all going to hell when Israel bombs Iran. Tread softly in the space...

Full Disclosure: Mr. Kaminis has created and agreed to Wall Street Greek policy to not author articles about securities he personally owns or holds beneficial interest in. In the event of a special case, Markos will make full disclosure of ownership interest. Please see our disclosure at the Wall Street Greek website, www.wallstreetgreek.blogspot.com