Retail sales fell 1.3% in May. Mask mandates were lifted mid-month and what emerges is exactly what we should hope to be seeing: splurging on big-ticket items and fixing up the house is out (for now); going out to eat and reconnecting with family and friend sis in. A soft patch in retail sales is perfectly in line with our expectation for a recreation renaissance this year.
What is it good for?
The monthly retail sales figures are typically a good proxy for consumer spending more broadly, but because of the unique characteristics of this cycle and where we are in terms of returning to some semblance of normal consumer activity, it may not be the best barometer for a few months. Retail sales fell 1.3% in May,although the blow was cushioned by the fact that April figures were revised from flat to +0.9%.
Most of the heavy lifting when it comes to consumer spending will be done on the services side and as seen in the top chart, retail sales stend to track goods spending more closely. Services do show up in some places in retail sales - spending at bars & restaurants for example shot up 1.8%. But because the report is a better reflection of goods spending, we expect it to be hit-and-miss for the next several months.
There is a story in the details of today's retail sales report for May.The days of spending money online and splurging on durable good sand home furnishings is pivoting toward getting ready for trips to see grandma and grandpa at the lake or the beach and evenings out reconnecting with friends at bars and restaurants.
What goes up...
Some of the best performing store types during the pandemic posted the largest monthly declines in May. Spending at motor vehicles & parts dealers, which represents the largest category of retail sales, slipped 3.7%. The motor vehicle category was one of the hottest areas for spending over the better part of the past 15 months. There was a sudden drop in ridership and public transit,so many rideshare drivers were without work and the federal government provided jobless benefits for those and other gig-economy workers. Demand for autos remains strong, too strong in fact. Demand is outstripping supply and some automakers have had to shut down assembly plants for want of semiconductor sand other scarce input components. We expect the supply chain constraints to act as a governor on the pace of auto sales for the foreseeable future.
Another category that was big winner during the pandemi but has seen a softening in sales more recently is building materials &supply stores where sales dropped 5.9%, the most of any category.With nothing else to do and nowhere else to go, many homeowner sturned to the yard and garden or took on a remodeling project.While a one pastime with nothing else going on, who wants to mow the lawn when a long overdue vacation beckons?
We expect many of these retail sales categories to see on-again,off-again growth in coming months as the services side of thee cono my sees the full effect of more than a year's worth of pent-up demand.
Places to go, nothing to wear
There were a few silver linings in today's report, other than the rise in restaurant sales. After a year at home, consumers are starting to ven ture out and many of the categories that posted higher sale sin May suggest consumers first want to improve their appearance.Spending at clothing stores rose 3.0% in May, as we now have places to go but nothing to wear. This gain, however, was likely partly boosted by higher prices during the month, as last week we learned from the separately released CPI data, that consumer prices for apparel leaped 1.2% in May. Further indication of consumers gearing up for normal life was a pop in department store sales(+1.6%) and health & personal care retailers (+1.8%).
These categories of goods spending support a return to normal social activity and are encouraging signs that consumers are it ching to get out and spend. The May report for retail sales therefore does not change our expectations and actually remains supportive for a boom in Q2 consumer spending.
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A real-time quote for a fast moving stock may be more indicative of what has already occurred in the market rather than the price you will receive. Your Execution Price and Orders Ahead In a fast market, orders are submitted to market makers and specialists at such a rapid pace, that a backlog builds up which can create significant delays. Market makers may execute orders manually or reduce size guarantees during periods of volatility. When you place a market order, your order is executed on a first-come first-serve basis. This means if there are orders ahead of yours, those orders will be executed first. The execution of orders ahead of yours can significantly affect your execution price. Your submitted market order cannot be changed or cancelled once the stock begins trading. Initial Public Offerings may be Volatile IPOs for some internet, e-commerce and high tech issues may be particularly volatile as they begin to trade in the secondary market. 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For example, you place an order to buy at a stop of $50 which is above the current price of $45. If the price of the stock moves to or above the $50 stop price, the order becomes a market order and will execute at the current market price. Your trade will be executed above, below or at the $50 stop price. In a fast market, the execution price could be drastically different than the stop price. A "sell stop" is very similar. You own a stock with a current market price of $70 a share. You place a sell stop at $67. If the stock drops to $67 or less, the trade becomes a market order and your trade will be executed above, below or at the $67 stop price. In a fast market, the execution price could be drastically different than the stop price. A stop limit has two major differences from a stop order. With a stop limit, you are not guaranteed to get an execution. If you do get an execution on your trade, you are guaranteed to get your limit price or better. For example, you place an order to sell stock you own at a stop limit of $67. If the stock drops to $67 or less, the trade becomes a limit order and your trade will only be executed at $67 or better. Glossary All or None (AON) A stipulation of a buy or sell order which instructs the broker to either fill the whole order or don't fill it at all; but in the latter case, don't cancel it, as the broker would if the order were filled or killed. Day Order A buy or sell order that automatically expires if it is not executed during that trading session. Fill or Kill An order placed that must immediately be filled in its entirety or, if this is not possible, totally canceled. Good Til Canceled (GTC) An order to buy or sell which remains in effect until it is either executed or canceled (WellsTrade® accounts have set a limit of 60 days, after which we will automatically cancel the order). Immediate or Cancel An order condition that requires all or part of an order to be executed immediately. The part of the order that cannot be executed immediately is canceled. Limit Order An order to buy or sell a stated quantity of a security at a specified price or at a better price (higher for sales or lower for purchases). Maintenance Call A call from a broker demanding the deposit of cash or marginable securities to satisfy Regulation T requirements and/or the House Maintenance Requirement. This may happen when the customer's margin account balance falls below the minimum requirements due to market fluctuations or other activity. Margin Requirement Minimum amount that a client must deposit in the form of cash or eligible securities in a margin account as spelled out in Regulation T of the Federal Reserve Board. Reg. T requires a minimum of $2,000 or 50% of the purchase price of eligible securities bought on margin or 50% of the proceeds of short sales. Market Makers NASD member firms that buy and sell NASDAQ securities, at prices they display in NASDAQ, for their own account. There are currently over 500 firms that act as NASDAQ Market Makers. One of the major differences between the NASDAQ Stock Market and other major markets in the U.S. is NASDAQ's structure of competing Market Makers. Each Market Maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the Market Maker will immediately purchase for or sell from its own inventory, or seek the other side of the trade until it is executed, often in a matter of seconds. Market Order An order to buy or sell a stated amount of a security at the best price available at the time the order is received in the trading marketplace. Specialists Specialist firms are those securities firms which hold seats on national securities exchanges and are charged with maintaining orderly markets in the securities in which they have exclusive franchises. They buy securities from investors who want to sell and sell when investors want to buy. Stop An order that becomes a market order once the security has traded through the designated stop price. Buy stops are entered above the current ask price. If the price moves to or above the stop price, the order becomes a market order and will be executed at the current market price. This price may be higher or lower than the stop price. Sell stops are entered below the current market price. If the price moves to or below the stop price, the order becomes a market order and will be executed at the current market price. Stop Limit An order that becomes a limit order once the security trades at the designated stop price. A stop limit order instructs a broker to buy or sell at a specific price or better, but only after a given stop price has been reached or passed. It is a combination of a stop order and a limit order. These articles are for information and education purposes only. You will need to evaluate the merits and risks associated with relying on any information provided. 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