Stocks rose Thursday after solid U.S. retail sales rolled in, sparking a broad rally across sectors, confirming to investors that, although fiscal stimulus may be needed for the continued speed of the economic recovery, the recovery has some of its own momentum.
The S&P 500 rose 0.35%, partially aided by the gain in large cap tech stocks, with the Nasdaq up 0.7%. The 10-Year Treasury yield, after having been pressured for a few days, rose to 0.74% from 0.73%. Yields rise when prices fall.
Retail sales for September rose 1.9% against varying reported estimates of around 1%. This points to the continued strength of the consumer’s recovery, as households have saved cash and benefited from benefits and government checks.
Consumer discretionary stocks joined the rally, with Starbucks (SBUX) - Get Starbucks Corporation Report up as much as 0.6%. The debt-laden major airlines rose almost 1%. Bank earnings earlier this week, while received with mixed sentiment from the broader market, did show massive improvements in loan loss provisions, with banks setting aside just a few billions dollars in total, against tens of billions last quarter. This points to a brightening outlook for consumer and business credit.
"Despite unemployment benefits expiring for millions of Americans, today’s retail sales figure shows us there is still some gas in the tank for the consumer,” wrote Charlie Ripley, Senior Investment Strategist for Allianz Investment Management in emailed remarks to reporters.
Bank stocks rose, with many of the lending-centric banks up more than the investment banks, which only rose a few tenths of a percentage point. A rough start to the week combined with a steepening yield curve Friday power bank stocks.
Without fiscal stimulus, the economic recovery may slow, but data are showing that, for the immediate, the recovery can maintain its speed, which some economists have been encouraged by.