This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

It's No Coincidence -- Stocks and Auto Sales Are Both Frothy


Story has been updated with early morning prices for Ford and GM shares.

DETROIT (TheStreet) -- Not surprisingly, record stock market performance is being matched by continued strength in the U.S. auto markets, with expected August automotive spending of $39 billion, the second highest monthly total in history.

However, the auto market, like other economic sectors, shows occasional signs of frothiness and easy credit, fueling concerns about a potential fallback.

Read More: Delta Is Right on the Ex-Im Bank -- Too Bad the Tea Party Is its Biggest Ally

Car sales for August are expected to be flat compared with the same month a year earlier, partially because August will have 27 sales days this year, compared with 28 sales days in 2013.


WATCH: More market update videos on TheStreet TV | More videos from Ruben Ramirez

Nevertheless, consumer spending on new vehicles in August is expected "to approach $39 billion, the highest level on record for the month of August and second-highest month ever behind July 2005 ($39.7 billion)," said J.D. Power analyst John Humphrey in a prepared statement.

Read More: 5 Most Beloved U.S. Airlines of All Time

"The record consumer spending is fueled by both high sales volumes and high transaction prices," Humphrey said.

Auto sales numbers are among the best economic indicators because they track a major consumer purchase, are reported quickly after the month ends and are almost never revised. Car sales for August are scheduled to be reported on Sept. 3.

Ford (F) shares year to date are running ahead of the S&P 500, while shares in GM (GM) , hobbled by an ignition switch scandal that led to 27 million recalls this year, have slid. 

Shortly after the opening bell on Wednesday, Ford shares traded down 7.5 cents to $17.29, while GM shares traded down 29 cents to $34.42. Year-to-date, Ford shares are up 12%, the S&P 500 is up 8% and GM shares are down 16%.


The pace of auto sales, tracked as the seasonally adjusted annualized sales rate, ihas been gaining ground this year. "We expect August U.S. light vehicle SAAR to track at roughly 16.6 million, representing a solid 5% improvement from 15.9 million in August of 2013, and a 1% increase from last month's 16.4 million," wrote J.P. Morgan auto analyst Ryan Brinkman in a recent report. TrueCar also forecasts an August SAAR of 16.6.

JD Power affiliate LMC Automotive projects 2014 sales of 16.3 million units, up 5% from 2013.

"As a very robust summer selling season winds down, optimism continues in the auto industry for the remainder of 2014, with expectations of economic growth beginning to catch up to the growth in autos," said LMC analyst Jeff Schuster in a prepared statement.

Auto sales have climbed steadily since they hit a 27-year low of 10.2 million in 2009. Sales reached 15.6 million in 2013. Sales of 16.5 million would equal the 2006 level.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7870 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs