U.S. Retail Sales Hampers Stock Market Rally

Posted Wednesday, April 15, 2020 by
Shain Vernier • 2 min read

There are bad numbers and then there are really bad numbers. Today brought two of the latter in the form of Retail Sales (March) and the Empire State Manufacturing Index (April). Both reports made the record books and set the stage for a sell-off in U.S. equities. With only a few hours to go in the American session, the DJIA DOW (-450), S&P 500 SPX (-60), and NASDAQ (-122) have given back yesterday’s gains.

Without further ado, here is a look at the dismal figures:

Event                                                                            Actual        Projected        Previous

Retail Sales (MoM, March)                                         -8.7%              -8.0%               -0.4%

NY Empire State Manufacturing Index (April)        -78.2              -35.0                -21.5

MBA Mortgage Applications (April 10)                     7.3%                NA                 -17.9%

You don’t need an advanced degree in quantum mechanics to interpret this group of stats. Retail Sales posted the largest month-over-month drop on record, coming in almost a full point below expectations. The NY Empire State Manufacturing Index (April) also made history, posting its lowest-ever reading.

The economic data isn’t good; in fact, it’s flat out bad. But, there is a silver lining. MBA mortgage applications are up dramatically from the previous release. Perhaps this is a signal that the low-interest rate lending environment will be the primary catalyst for a robust COVID-19 rebound.

DOW Stalls At 50% Retracement Following Weak Retail Sales

Following the rough pre-market economic data releases, the DOW has put in a weak showing. Subsequently, valuations of June E-mini DOW futures have fallen beneath the COVID-19 50% Fibonacci Retracement (23,796).

retail sales
June E-mini DOW Futures (YM), Daily Chart

Here are the key levels to watch in this market for the near future:

  • Two-Way Catalyst: 50% Retracement of COVID-19 Crash, 23,796
  • Support(1): Bollinger MP, 22,709

Overview: If you take a close look at this week’s action in the June E-mini DOW, you can see the importance of the 50% Retracement level (23,796). This is shaping up to be a key technical area even after this morning’s Retail Sales report. If it turns out to be valid resistance, a swift fall to 22,500 may be just around the corner.

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