The Retail Sector in the US Is Slowing; Not Good for the S&P 500

Dow Jones
Dow Jones

Retail sales data from the United States came in mixed today, but are much worse than for the previous month, showing that the rise in coronavirus cases after the July 4 holiday weekend crushed the retail space. According to data from the Census Board, Retail Sales came in at 1.2%, which was lower than the market expectations of 2.0% and also lower than last month’s figure of 8.4%. The Core Retail Sales component of the report came in at 1.9%, which beat market expectations of 1.3% but was also lower than last month’s 8.3%.

Altogether, the picture shows a steep drop in retail sales since the economy reopened and is indicative that unless a federal-funded relief package is provided soon to improve consumer spending, there could be bad times ahead for the retail sector.

Friday’s figures are indicative of sharp slowing: a record gain of 18.2% in May was followed by an 8.4% increase in June, with this month’s figures barely showing any improvement. Presently, the talks between Democrats and Republicans over the financial rescue package for households and small businesses remain deadlocked. Millions of Americans remain jobless, and the lack of rescue payments could force individuals and households to tighten their belts even more, which could put the retail market under severe strain in the coming months. 

The dire nature of the report is reflecting on price action on the S&P 500. It is presently trading 0.2% lower at 3373.4 as at the time of writing. 

Technical Outlook for S&P 500

The outlook for the index is unchanged at the moment, as the price continues to stall at the resistance formed by the 3393.4 record high and the upper wedge border. Rejection at that area opens the door for a possible drop towards 3335.5. Further decline breaks the wedge and sends the price lower to 3228.4 and possibly 3137.0. 

For the S&P 500 to break into record territory, it must scale the 3393.5 resistance on the charts. This move will also invalidate the pattern and form the higher highs needed to restore the uptrend on the S&P 500. 

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S&P 500 Daily Chart

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