Retailers led by Wal-Mart Stores Inc. reported January sales figures below already-weak estimates, pushing sales growth to a five-year low by one measure and further fanning concerns the U.S. economy is entering a recession.
Sales at stores open at least a year, a key measure of retailers' performance, rose just 0.3% in January, according to an index compiled by Thomson Financial, below expectations for a 1% gain. Half of all retailers tracked by Thomson turned in disappointing results. (See a sortable retail-sales chart for January.)
The January weakness came on top of a downbeat holiday season, after which nearly a dozen retailers cut their profit forecasts.
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Excluding seasonal fluctuations, sales posted the worst gain since March 2003, when the Thomson Financial index was flat. That same month was the last time before January that an index compiled by the Institute for Supply Management showed a contraction in the U.S. services sector.
Yet the retail ETF rose 2.44% because:
Retailers in the Standard & Poor's 500 Index advanced the most among two dozen industries on the J.C. Penney and Gap forecasts.
Then there was the Treasury auction:
Treasuries tumbled after the government's $9 billion auction of 30-year bonds at the lowest yields ever chased away investors.
The longest-maturity U.S. debt fell the most since 2004 as bondholders concluded that yields were too low given the Federal Reserve's determination to cut interest rates and keep the economy out of a recession. Before the government's sale, investors expected a 4.41 percent yield, based on pre-auction trading. The bonds were sold at 4.449 percent.
This indicates that the government's desire to increase spending may run into some serious problems. But the markets rallied.
Seriously, I am guessing today's action was as much technical as anything else.
The indexes spent most of the day moving higher. They had a small sell-off at the beginning of the afternoon, but recovered.
My guess is there are some traders looking to pull a sell trigger right now, but are looking at the daily charts and have decided to wait for the lower levels or another catalyst. The bottom line is we've been hammered with bad news for he last month or so; maybe traders are just getting numb to the whole thing.