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Market Update

U.S. Stocks Churn as Part of Global Bounce — Retail Picture Still Not Clear

August 13, 2015

Taking cues from Asia and Europe, U.S. stocks tipped higher early Thursday, while the dollar eased slightly and Treasury yields rose in step with falling bond prices. Stocks trimmed gains as the much-anticipated monthly retail sales report showed a 0.6% July rise, including a 0.6% gain when gasoline sales were excluded. The reading was just shy of Street expectations for a 0.7% rise. The report included upward revisions for the past two months and is seen doing little by itself to sway the Federal Reserve from a bias toward higher interest rates.

Asian stock investors exhaled with relief on Thursday, sending battered indexes higher in a mild bounce. Stocks rallied in the region even as China intervened for a third day to guide the yuan lower as a potential benefit to Chinese exports. 



The broad S&P 500 (SPX) continues to churn in a relatively narrow band, bouncing again once it tipped into support at 2034-55. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

SPX Support. The S&P 500 (SPX), in figure 1, “yet again dipped into its critical zone of support at 2034-55,” notes Sam Stovall, U.S. equity strategist at S&P Capital IQ. The index closed around 2,086 on Wednesday after dropping to as low as 2,052. The support zone has drawn fresh buying of late each time that SPX revisits. But the lack of higher highs has some technicians (and stock bulls) hungry for a breakout.

Another Retailer's Revenue Miss. Kohl’s (KSS) continued a theme of disappointing retail-sector revenue with its report issued this morning. The department store chain missed profit and sales estimates for its Q2 and guided to the low end of the range for full-year earnings. The company earned an adjusted $1.07 in the just-reported quarter, below the Street view for $1.16. Revenue rose to $4.267 billion from $4.242 billion a year earlier but were below a Street consensus of $4.313 billion. Kohl's said it expects full-year EPS to come in at the low end of its $4.40 to $4.60 range. After today’s close, Nordstrom (JWN) is expected to report Q2 earnings of $0.90 a share, according to Street analysts, down from $0.95 a year earlier.

Cisco’s New Guy Pleased. Cisco Systems (CSCO) recorded a slower pace of growth but CEO Chuck Robbins—in his first post-earnings remarks as chief—said the rebound remains on track. The network equipment firm has been grappling with sales declines in its two biggest hardware businesses, switching and routing systems. But new product lines have launched a rebound in those categories, Robbins says. Cisco said Wednesday that switching revenue grew 2% in its fiscal Q4, while router sales grew 3%. The company also forecast revenue growth for its fiscal Q1 of 2% to 4%, as well as adjusted earnings per share of $0.55 to $0.57. Analysts polled by Thomson Reuters expect 3% growth and $0.56 in earnings.

Good trading,

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