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Earnings: Is Plastic Fantastic, and Who’s Solving the Retail Riddle?

April 26, 2017
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Keeping the lights on in the American economy requires an array of power sources–“plastic” being one.

Based on the initial few weeks of the latest U.S. earnings season, consumers appear to be in more of a spending mood – as seen in strong results reported by some major credit card companies, says JJ Kinahan, chief market strategist at TD Ameritrade.

That’s one theme emerging from the earnings season so far, Kinahan says. The next logical question is, where are consumers doing their spending?

Recent credit card company earnings indicate “the consumer is healthy,” he says. “Credit card companies are a big part of what drives retailer revenue. Now, retailer earnings are going to be so much more interesting.”

Solving the Retail Riddle

Consumer spending accounts for over two-thirds of U.S. GDP, and while recent years produced sluggish and irregular growth, there are signs things are perking up. Last year, for example, revolving consumer debt, which includes credit cards, posted its biggest gain since 2007, Bloomberg reported, citing Federal Reserve data.

Kinahan says market professionals are watching closely to see who will be the winners and losers among retailers, as consumers increasingly shop with a few clicks of a mouse or finger taps on a smartphone, rather than visit physical stores.

“Who’s figuring out best combination of brick-and-mortar versus online?” Kinahan said. “The big mystery in retail is who’s solved the riddle.”

Happy Days are Here…Still?

More broadly, CEO remarks on recent quarterly earnings convey growing bullishness toward the domestic and global economy, Kinahan says.

While some recent U.S. economic gauges have disappointed, as have some company earnings, business leaders are eyeing the bigger picture.

“CEOs so far are striking a very positive chord, despite broader economic numbers being not quite what we like to see,” Kinahan says. For CEOs, “it’s not so much about meeting Wall Street expectations, it’s focusing on driving growth.”

Patrick O'Hare, chief market analyst at, agrees, citing robust profit for some railroad companies as another indication of improving consumer health.

“CEOs are generally sounding upbeat about the U.S. and global economy, a perspective that fits with the rising sentiment readings that have been seen for consumer and business confidence,” O’Hare says.

Early this week, the Dow Jones Transportation Average, which includes railroads and other shipping companies, surged to its highest level since mid-March, amid a jump in global stock markets following France’s weekend election.

“Transports are seen as a leading indicator given the key role they play in transporting goods and materials for production and end-use consumption,” O’Hare adds.


Among CEOs, Jeffrey Immelt of General Electric Co. had some telling remarks during his company’s earnings call last week, Kinahan says.

“We see global growth accelerating, while the U.S. continues to improve,” Immelt said on the call, adding that since the beginning of the year, he’d visited China, Southeast Asia, Latin America and Africa, and business in each was all “stronger than last year.” It’s an “attractive environment,” he said.

A multinational conglomerate, GE is considered a bellwether for the global economy among market professionals, Kinahan says. The company makes a variety of products for consumers and industries – light bulbs, of course, but also jet engines, X-ray machines, oilfield drilling equipment and more.

Even with just a fraction of earnings reported so far, seeing and hearing is believing, especially when it’s straight from the CEO’s mouth, Kinahan says.

“What I’m taking from earnings so far… is we’re still in period where the growth opportunity is better than what market is giving credit for,” he concludes.

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