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Economic Data, Retail Earnings Firming Up 2022

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Early this morning, Industrial Production and Capacity Utilization numbers came in for April, and both posted solid surprises to the upside: +1.1% last month more than doubled the +0.5% expected, and even higher than the previous month’s unrevised +0.9%. Improvements on production are another good sign the economy can fight off inflation.

Capacity Utilization reached 79.0% last month, above the consensus 78.6% estimate and notably higher than the slightly downwardly revised 78.2% for March. It’s also the highest single-month rate since December 2018. For manufacturing, it rose +0.6% to 79.2% — the highest we’ve seen since April 2007.

We also saw sub-headline Retail Sales numbers for last month that were promisingly strong this morning, albeit with a big energy cost headwind we already knew about. And Business Inventories were a tick higher than expected to +2.0% — not exactly a sign of runaway inventories just yet. This is not to say these metrics are necessarily threading the needle to a soft landing, but they’re not NOT saying that…

So it’s a three-day winning streak for the Dow, which closed +1.34% on the day, or +431 points. The S&P 500 did one better today, +2.02% while the Nasdaq, for a while this afternoon up 3%, closed +2.76%. The small-cap Russell 2000 beat the field this Tuesday, +3.19%.

Retail earnings season continues tomorrow with Target (TGT - Free Report) snd Lowe’s (LOW - Free Report) reporting — one day after Walmart (WMT - Free Report) posted a big disappointment for Q1 but Home Depot (HD - Free Report) performed strongly. Will we see a similar dynamic between specialty retail and big-box stores Wednesday, or will we look back on Q1 in this space and see lack of execution at specific companies? Surely today’s data would suggest a fairly strong quarter for Retail overall.

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