Posted November 17, 2022
By Matt Insley
Good News Bears
Today, we’ll start with some “good” news on the economy…
Why the quotes? In the upside-down world we’re living in, the “good news is bad news” rule still applies.
Here’s how that went down yesterday: A jump in retail sales reported yesterday beat estimates, then stocks dropped.
The simple explanation for this rule is that the Federal Reserve is trying to cool the economy with interest rate hikes that pull down stock prices. Good economic news means it’s more likely the Fed will keep raising rates at a higher pace for longer.
But, there’s another troubling reason we should take those retail numbers with a healthy dose of salt…
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Your Rundown for Thursday, November 17, 2022...
$127 Billion Scourge
On the macroeconomic level, a broad measure of consumer spending ticked up more than analysts predicted. There’s always some noise in data like that. For instance, this time around, auto sales were boosted by car replacement sales in areas hit by Hurricane Ian.
If we drill down to what’s being reported on the company level? The picture isn’t pretty.
Yesterday, Target reported a 50% decline in profits for the third quarter, highlighting “dramatic changes” in consumer spending.
That’s no surprise with inflation running at nearly 8%. Everyone I know feels the sting of that sticker shock. And Target says they see that hitting demand hard ahead of the holidays.
But Target also highlighted another troubling trend in recent years that is plaguing retailers: organized shoplifting rings.
Shoplifting sounds like a petty crime, but it is taking a larger and larger toll, with Target blaming theft for $400 million worth of profit.
Reporting on a “heavily armed takedown” of a “major retail theft ring,” a Charlotte, North Carolina NBC affiliate reported that one coordinated group stole $5 million worth of over-the-counter drugs.
The total costs to the U.S. economy reached an estimated $127.5 billion a year, the station reported, losses that are eventually passed on to the consumer.
And according to Loss Prevention Media, “Winter is the biggest season for theft, with 81% of retail theft during this season occurring around the holidays.”
Before we go, I want to pivot to some news that may be positive for those of us trying to get some holiday shopping crossed off our lists.
Another dynamic analysts are watching is a jump in inventory across certain retail sectors, as demand for certain products wanes.
Some are building new storage for the excess merchandise and may try to delay sales as a tactic.
But in some cases they’ll resort to big clearance sales, so be on the lookout for big holiday deals!
Market Rundown for Thursday, Nov. 17, 2022
S&P 500 futures are down over 1% to 3,915.
Oil is down almost 2% to $84 for a barrel of West Texas crude.
The yellow metal is down about 0.80% to $1,761.50 per ounce.
And Bitcoin is hanging in there at $16,500.
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