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Pre-Markets Down on Disappointing Retail, Imports, Q4 Earnings

Friday, January 14, 2022

Long-awaited reports on Retail Sales and the biggest Wall Street banks to kick off the busy Q4 earnings season, but just about every actual figure hitting the tape amounts to a disappointment. Retail Sales, expected to dip a toe into negative territory, instead did a belly-flop: -1.9%, from a downwardly revised +0.2% for November. Import Prices, also for December, swung to a negative -0.2% from +0.2% expected. And Q4 earnings reports were lackluster on the topline.

Retail Sales for December historically demonstrate strength from the consumer, capturing as it usually does holiday shopping season. But based on numerous reports warning of supply constraints for the holidays, consumers pulled forward many of these purchases in November and especially October, which was +1.8%. That said, October’s headline plus November’s +0.2% are reduced this morning to just +0.1% for holiday shopping season after December’s disappointing -1.9%.

Ex-autos was supposed to be a better read, but in face it was even worse: -2.3% versus +0.3% expected — a 200 basis-point negative surprise. Ex-autos & gas? The numbers keep getting worse: -2.5%. And the Control number, which gets plugged into many economic metrics utilized by the Fed, came in at a woeful -3.1%. Consumer activity last month can be described in one word: weak.

This may also be the second major economic print, after yesterday’s weekly jobless claims, that accounts at least partially for the Omicron variant taking a bite out of the immediate economy. Store closures, and even cancelled family gatherings over the holidays due to the highly infectious variant of Covid-19 is likely a big factor in these disappointing numbers.

Import Prices may be experiencing similar headwinds, as Omicron is a global event in the course of the two-year (so far) pandemic. Even still, a swing to -0.2% from +0.7% month over month is not a good look. This is moderated somewhat when we see that stripping out petrol (fuel) prices, this springs back up to +0.3%. Thus, higher fuel costs look to have taken this monthly headline down to the extent it has.

Year over year, Import moderation comes as more welcome news: +10.4%, while still steep, is less garish than the +11.7% we saw a month ago, which was the highest read in 10 years.

Exports last month also dropped precipitously: -1.8% versus +0.3% expected, again dealing with the same issues noted above. But the year-over-year print is an even more welcome sight: +14.7% follows the previous month’s +18.2%, the highest level we’ve seen since 1984.

Finally, JPMorgan JPM and Citigroup C beat expectations on their Q4 bottom lines, but missed conspicuously on the top. Especially JPMorgan, which had asserted itself as the strongest of the big banks, yet missed on revenues by more than 2% in the quarter.

Only Wells Fargo WFC managed to post higher revenues along with its earnings beat. Wells Fargo came into this earnings report carrying a Zacks Rank #2 (Buy), whereas JPMorgan and Citi were both Zacks Rank #3 (Hold) stocks.

Pre-markets are down big at this hour, but off early session lows: the Dow -250 points, the Nasdaq -115 and the S&P 500 -20 points. The assumed narrative of the past week or two — that the big banks were worthy investments in which to rotate from all the high-growth tech stocks — dashes on the rocks a bit this morning. Of course, once interest rates rise this will help the big banks, but that’s an issue for another day.

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