Today's report underscored significant strength in each of the key areas:
- Sales at retailers and restaurants rose 0.6%.
- Sales year over year were up 2.7%, although when you subtract out automotive sales and auto parts, that year over year number becomes 0.7%.
- Sales of building materials and gardening supplies were up 3.9%.
In the Automotive industry, we use Ford (NYSE:F) as the bellwether. They report before the open on the 28th. We'll be watching the seasonably adjusted annual percentage rate of cars sold, which, if the retail sales report is any indication, should be a decent quarter for the industry. Also keep an eye on Magna International, (NYSE:MGA) a Canadian automotive parts supplier that does business worldwide. Their earnings report typically provides a fantastic overview of the health of the industry across the globe. Their earnings date has not yet been announced, but we expect it to be before the bell either August 5th or 8th.
The surge in building materials and gardening supplies should be excellent news for the large home improvement retailers like Lowes (NYSE:LOW) and Home Depot (NYSE:HD). They report August 17th pre-market and August 16th pre-market respectively.
In addition to the specific stock projections we can glean from these numbers, there is also the signal that consumer confidence is on the rise. That boost in spending should translate into a healthy nudge for the GDP, and with interest rates remaining low, we should also see an increase in corporate capital expenses and a corresponding increase in hiring. All-in-all, it was a very positive report, and it bodes well for the overall health of the current rally.