The ADP and service sector ISM surveys are the latest in a long line of recent economic data that shows the U.S. economy losing momentum towards the end of 2013 after a fairly strong third quarter. We recently saw GDP growth estimate for 2013 Q4 revised down and all data for 2014 Q1 has been coming in on the soft side. One would have expected this negative economic turn to have weighed on the stock market, but investors have blamed it all on the weather.
The Fed appears to be in full agreement with this narrative as well, with its Wednesday Beige Book read on the economy leaning heavily on weather to explain the soft patch. Given this, investors likely wouldn’t care if the jobs tally tomorrow comes short of expectations. In fact, weather has hardly improved in any meaningful way thus far in March either, though admittedly it is fairly early in the month.
The skies will eventually clear up, but another week or so of frigid temperatures will mean that we wouldn’t get the ‘clean’ numbers in April – we will have to wait till the following month for that. This wait for ‘clean’ data is slowly morphing into that by-now familiar second-half turnaround hope that we have been seeing year after year in this recovery. Investors seem to be hoping that it will be different this time.
On the earnings front, we got another weak retail sector report this morning, with Costco (COST) coming short of expectations. The picture is even grimmer at Staples (SPLS) which announced massive store closures as part of a $500 million cost-cutting program in its quarterly. The office supplies retailer reported -7% drop in same-store sales at its brick and mortar locations, as customers continue to move towards mass merchants like Wal-Mart (WMT) and Amazon (AMZN) for office supplies. Office Depot (ODP) is facing similar headwinds. In other reports, Joy Global (JOY) also missed expectations on further downslide in backlog.
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment