Thursday offers a pretty heavy schedule before the week ends on a light day of data on Friday. Stock futures point to a higher open as markets are optimistic about the two data reports set for release at 8:30. Meantime, crude oil has breached $72 per barrel, ten-year Treasuries have eased from as high as 4.00% yesterday to 3.95%, and the U.S. dollar is a bit weaker.
The main event today is the Retail Sales report for May, which is expected to show a month-to-month increase of 0.5%, following a 0.4% cutback in April and a 1.3% contraction in March.
Such improvement would bolster widespread claims that the worst of the recession is over. About two-thirds of the U.S. economy is consumption-based, so retail sales acts as a leading indicator for the rest of the economy.
Markets often look past the headline o the ex-autos figure to avoid volatility. It is expected to advance by 0.2% in May, following a -0.5% print in April.
“Consumers are beginning to spend the extra income resulting from the federal stimulus package and income tax refunds,” wrote the forecasting team from IHS Global Insight. “But overall spending remains lackluster, as rising unemployment leads to cautious discretionary spending.”
Released at the same time is the weekly Jobless Claims report. Last week’s release survey saw the first drop in continuing claims since January, so markets will want to see if that was merely a blip or the start of a new trend.
Initial claims for the first week of June are expected to come in at 614k, following a dip to 621k claims in the prior week. Forecasts range from 606k to 640k.
“If consensus is correct and the number of initial claimants falls to about 615k, it would be the fourth straight weekly decline, it would be the lowest level in five weeks, and it will help ease some already-stressed state and local governments’ finances,” commented Jennifer Lee from BMO Capital Markets in a morning note.
At 10am, Business Inventories are expected to drop back 0.8% in April, following a 1.0% cut in overhang in March.
At 1:15, Atlanta Fed President Dennis Lockhart will speak on the economy before the National Association of Securities Professionals. A Q&A will follow.