Retail sales unexpectedly slid 1.9% in December, far worse than expected, as online sales dived. It didn't help that the chip shortage still held back auto sales and families tried to get their holiday shopping done early amid worries over supply shortages. Excluding autos, retail sales sank 2.3% on the month, the Commerce Department said. After the retail sales data, Dow Jones futures pointed solidly lower in Friday morning's stock market action.
XWall Street economists expected retail sales to be unchanged on the month, while rising 0.3% excluding autos.
Sales slumped 2.5% minus autos and gas, vs. expectations of 0.2% growth.
The weak retail sales data in December came along with modest downward revisions to November data. Retail sales for November were revised down to +0.2% from the 0.3% gain initially reported. Excluding autos, November retail sales were up 0.1% vs. the initial print of +0.3%.
For the full year, retail sales still rose 19.3% overall and 18.3% excluding autos.
Retail sales predictably surged in the spring, fueled by stimulus, then revved back up in late summer and early fall, amid a Covid upsurge tied to the delta variant. Economists expect strong wage growth and elevated savings to continue to power consumer spending. However, the lapse of fiscal stimulus and generous pandemic unemployment benefits could muddy the picture, particularly if the omicron variant slows hiring.
Dow Jones, Treasury Yield Reaction To Retail Sales
After the retail sales data, Dow Jones futures, already down solidly, extended losses to 0.7% early Friday. S&P 500 futures lost 0.7% and Nasdaq 100 futures 0.6%.
The stock market reversed lower on Thursday, as the rebound attempt appeared to falter after early-year selling amid Fed fears. The Dow Jones, with its exposure to financials and industrials, has outperformed, slipping just 0.6% this month through Thursday. The broad-based S&P 500 is off 2.25% this year, while the Nasdaq composite has lost 5.4%.
Of the three major indexes, only the Dow Jones remains above its 50-day moving average.
The 10-year Treasury yield was little changed at 1.71%, erasing earlier gains. The 10-year yield topped 1.8% early in the week, hitting levels last seen in January 2020.
Retail Sales Details
The strongest categories:
Building materials and garden supply stores rose 0.9%. Health and personal care store sales rose 0.5%.
Among the weaker categories:
Nonstore retailers like Amazon (AMZN) saw sales dive 8.7% on the month, still rising 10.7% from a year ago.
General merchandise store sales fell 1.5%, including 7% for the department store subgroup.
Electronics store sales fell 2.9%.
Sales at food service and drinking places slipped 0.8%.
Top Retail Stocks To Watch
Retail-Super/Mini Markets Stores is the top-performing retail industry group, ranked No. 11 of 197 based on price performance and momentum. On Thursday, Kroger (KR) stock shot up 5% to 49.48, closing right below the top of a buy zone, according to a MarketSmith analysis.
The flagship IBD 50 list includes just one retail stock, Tractor Supply (TSCO).
The Retail-Restaurants group is ranked a lowly 152 out of 197. However, McDonald's (MCD) stock has been performing well and found support at its 50-day average this week.
Make sure to read IBD's daily afternoon The Big Picture column to get the latest on the prevailing stock market trend and what it means for your trading decisions.
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