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Good morning. Following Tuesday’s retail-led rally, stocks and equities futures have been gaining ground all morning. That’s despite fresh concerns about the emerging coronavirus hotspot in Beijing, and mounting cases in America’s Sun Belt, notably Florida and Texas.
Let’s see what’s moving markets.
Retail sales is as good a metric as any in assessing consumer confidence. The consumer is the engine of the U.S. economy, accounting for roughly 70% of U.S. GDP. And so yesterday’s numbers were an encouraging sign of progress in the long road back to economic recovery.
The markets of course saw the numbers, and took a victory lap—at one point, sending Wall Street 4% higher. There was a lot to cheer. The 17.7% month-on-month jump in retail sales was better than anticipated, and notched a new monthly record. The multiplier effect could be significant. As Berenberg Capital Markets economist Mickey Levy pointed out in an investors note yesterday, “the strong rebound in retail sales in May bodes well for stronger gains in retail employment over the summer after a relatively small rebound in May (+368k increase in May retail employment after a cumulative decline of 2.4m in March and April).”
A closer look at yesterday’s numbers reveals there are still clear winners and losers in the retail sector. Let’s look at the chart, courtesy of Berenberg.
The biggest winner, of course, is the online retailers. They’re represented by the “non store retailers” row at the top, up an impressive 25.4% in the February-to-May period. Grocery stores (+12.8%) and DIY-home-builder stores (+9%) are also in the black over that three-month span. Everything else is down in that stretch.
Who were the big winners last month? Auto dealers and car parts retailers saw the biggest jump. So, it wasn’t just me buying a new set of tires last month. (A car battery, too).
Overall, the +17.7 handle was more than double consensus estimates, showing, to paraphrase my colleague Phil Wahba, the resilience of the American shopper is alive and well. That’s an encouraging sign for the economy as lockdown measures relax further. Wahba quoted Moody’s vice president Mickey Chadha who called the May figures “an astonishing feat.”
The markets certainly felt so.
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Have a nice day, everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
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