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Friday, September 15, 2017

We see new economic data before the opening bell today, but we’ll need to parse it a bit to see if we’re looking at effects of the hurricane influencing August Retail Sales results. The headline number was -0.2%, whereas expectations were for +0.2%. This is identical with what the control metric measured. Ex-autos, retail sales rose to 0.2%; however, +0.5% was expected. Ex-autos and gasoline, we see a read of -0.1%, again off the expected +0.3%.

So first off, these are somewhat disappointing numbers, in that inflation metrics are regularly being sought to drive numbers upward to meet the Fed’s goal of 2% inflation in the market. These numbers do not show this has yet gained traction. Then again, we may be seeing an anomaly in the data here — or rather, two anomalies: one named Harvey and one called Irma.

Stripping out auto sales for the month of August boosted the overall figure from -0.2 to +0.2, so it’s safe to say both the lack of auto sales dragged retail numbers down for the month, and that history dictates that fewer autos are sold ahead of and during Category 4 hurricanes. Strip out gasoline with the auto sales, we see the number fall back to a -0.1%, which would suggest a large portion of price hikes in the overall market are associated with higher gas prices. This would point to not only Floridians filling up their tanks on the way out of the state to wait for Hurricane Irma to pass, but also the spike in refined oil (gasoline) prices as Hurricane Harvey deluged the largest region of oil refineries in the United States.

That said, we still see big misses from analyst estimates across the board. And one clearly not-hurricane-related number — July Retail Sales — was cut in half from a very strong +0.6% in the initial read to +0.3% in today’s revision. This would suggest more than an anomaly of datas taking place last month. The question will be how the next three months — September, October and November — register on inflation metrics as a rebound from hurricane damage takes place and we begin to enter holiday shopping season. The reason these numbers are important is that they will likely influence he Fed’s decision to raise interest rates again before the end of the year.

Currently, odds are that Janet Yellen — or whomever the Fed Chair may wind up being in the future — and company will still not raise rates in December, but just barely at 44%. There is a 48% chance the Fed raises in its January meeting and 59% in March. That’s a long way off, however; plenty of economic data will have rushed beneath the bridge by then.

Oracle’s Earnings Island

Separated cleanly between Q2 and Q3 earnings season, software and solutions giant Oracle (ORCL - Free Report) reported fiscal Q1 2018 results after the closing bell yesterday, beating earnings estimates by a penny to 62 cents per share on quarterly sales of $9.21 billion, which easily outpaced expectations of $9.03 billion. Cloud revenues helped bolster results in the quarter and also took a larger share of company revenues overall in the quarter.

However, lowered expectations for full-year earnings have sent ORCL shares trading lower both in yesterday’s late trading and today’s pre-market. After spiking 4.5% lower yesterday afternoon, Oracle looks to open down roughly 4% when the opening bell strikes.

Mark Vickery
Senior Editor

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