NEW YORK (Real Money) -- We are nearing the home stretch in the latest earnings season, and the hurricane of information that arrives at Wall Street every three months has not broken the markets. Perhaps it has even fueled the market's comeback from the correction seen a few weeks ago. Amid all this, there are important emerging themes that you have to be aware of as we approach the peak of the fourth quarter. Understanding the deeper issues beneath the news of the day is incredibly helpful when it comes to your decision to adjust (or not adjust) your portfolio into year-end.
Will Gas Savings Boost Consumer Spending?
Gas prices at the pump plunged by about 33 cents per gallon in October, following an approximate 10-cent drop in September. Parts of the country are reporting gas prices below $3. According to research firm Gasbuddy, if oil continues to average $80 a barrel (it appears set to fall a bit further), gas prices may fall a few cents more. Should oil remain below $78, gas prices could be on a new downward trajectory into Black Friday and Cyber Monday.
The gas-price decline is not being reflected in sales, margins or outlooks of consumer-focused companies. Following earnings reports from such names, none of the executives I have talked to have voiced optimism that the gas-price decline in the U.S. would unlock spending power in the holidays, nor in the first quarter of 2015. I continue to use "gas" as a search keyword in earnings-call transcripts, to look for indications that consumer companies have experienced renewed foot traffic as a result of lower gas prices. No dice.
The data support these observations. Consumer spending declined 0.2% in September, a weaker result than what the consensus had forecast. Spending advanced 0.5% in August -- before the plunge in gas prices.
Maybe August spending trends, coupled with the recent consumer-confidence reading -- which is the highest we've seen since July 2007 -- are signals of the spending power that consumers are reluctant to unleash before the holidays. I am not willing to position clients based on that thesis just yet, but I am prepared to reverse course, should Walmart (WMT) mention quarter-to-date sales trends improvement next week in its earnings announcement.
Consumer Stocks I Am Considering
Here are a few consumer stocks to which I would want exposure, when consumers start to spend gas savings: