Two cooling inflation readings carried the broad market to a record on Thursday, taking the S&P 500 through 7,800 for the first time, and Friday morning supplied the explanation for where the cooling came from.
July retail sales contracted 0.6% against a consensus for a 0.1% gain, and preliminary August consumer sentiment landed at 51 against a 54.5 consensus
The Dow Jones Industrial Average opened at its session high near 53,900 and has not traded back to it since. The disinflation came with an invoice The retail sales miss was broad rather than a single soft line. Headline sales fell 0.6% where the consensus looked for a 0.1% gain, sales excluding autos fell 0.3% against a 0.2% consensus, and the control group that feeds the consumption estimate in Gross Domestic Product (GDP) fell 0.4% after a 0.4% rise the month before.
A 0.7 percentage point miss on the headline is not noise around an otherwise fine quarter. The release ninety minutes later removed any benign reading of that. Preliminary August consumer sentiment printed 51 against a 54.5 consensus and 55.2 in July, roughly 8% lower on the month and unwinding two months of improvement in one go, while the expectations component dropped to 50.6 from 55.4.