Weak retail sales fails to deter bulls

Figures released by the department of commerce on Friday showed a 0.9% fall in retail sales for the month of June - the worst reading since August 2005. Analysts had been expecting a fall of 0.3%. Sales ex autos fell 0.4% the worst since last September. Analysts had forecast a rise of 0.2% ex autos.

It seems investors are willing to look past weak retail numbers and sub-prime jitters and pin their hopes on better than expected earnings for 2Q07. General Electric gave comfort to the market on Friday announcing that they would divest their sub-prime business and deploy more capital in buybacks and reiterated their full-year earnings forecasts.

Large companies with international operations exposed to strong global growth are the place to be as they can insulate themselves from a slowing domestic economy, reap the benefits of a weak dollar and prop up earnings with share buybacks. They can't do it indefinitely but can they do it long enough to ride out the current slowdown?


Consumer sentiment rebounds in July
University of Michigan/Reuters gauge increases to 92.4
By Greg Robb, MarketWatch
Last Update: 4:17 PM ET Jul 13, 2007

WASHINGTON (MarketWatch) -- U.S. consumer sentiment rebounded in early July, as rising stock prices and falling gasoline prices brightened the outlook.

The consumer sentiment index rose to 92.4 in July from 85.3 in June, according to a monthly survey released Friday by Reuters and the University of Michigan.
This is the highest level since January. The level in June was the lowest since last August.

Economists were expecting an improved reading of around 86.5, according to a survey conducted by MarketWatch.

The current conditions index rose to 105.7 from 101.9, the highest level since February. The expectations index jumped to 83.9 from 74.7, the highest level since January.

Economists attributed the improvement to the strength of the stock market and the recent drop in gasoline prices.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, noted that gasoline prices are rising again, so he said it was doubtful the jump in sentiment "represents the start of a sustainable trend."

Earlier on Friday, the Commerce Department reported retail sales fell 0.9%, the biggest decline since August 2005.

The economic team at Action Economics said the various measures of consumer confidence are at solid levels, supporting the notion that retail sales will recover from their June weakness.

Earlier today, the government also said oil prices boosted import prices by 1% in June. In addition, the government reported business inventories rose 0.5% in May.