Wednesday, February 13, 2013

A good enough January Retail Sales report and the Comcast ( CMCSA - Analyst Report ) deal announcement should help stocks maintain the overall positive bias. But the gains will likely be modest given the dearth of stronger catalysts today, particularly given the stronger year-to-date gains.

The January Retail Sales data did not show that the payroll tax hike resulting from the Fiscal Cliff deal had any negative impact on consumer spending. The data came in in-line with expectations on the ‘headline,’ a tad bit better than expected excluding autos, and shade weaker relative to expectations excluding autos and gasoline.

Consumer spending was very strong at +2.2% annualized pace in the advanced fourth quarter GDP report and the concern has been that the fourth quarter momentum may not be sustainable in the current period due to the tax issue.

We didn’t see that happen in today’s report, though the part of the Retail Sales report that feeds into GDP calculation (excluding autos, gasoline, and building materials) came in weaker than expected. But this doesn’t mean the tax hike wouldn’t have any negative impact on consumer spending.

We didn’t see any pronounced negative effects in January, but it is not unreasonable to expect the tax effects to show up over a number of months. On balance, this report indicates that subsequent revisions to the fourth quarter consumer spending number will most likely be modestly positive and that the favorable momentum from the fourth quarter has carried into the current period.

In corporate news, we got better than expected fourth quarter results from Deere & Co ( DE - Analyst Report ) this morning and a major announcement from Comcast where the cable giant acquired the remaining 49% of NBC Universal from General Electric ( GE - Analyst Report ) for $16.7 billion. The Comcast deal was not expected to take place for another year, so the earlier announcement represents a major bet on the TV business.

Sheraz Mian
Director of Research