Retail Sales Forecast Cut for 2014

The National Retail Federation on Wednesday lowered its retail sales forecast for 2014, citing slow growth during the first half of the year.

The trade organization said it now expects retail sales to grow 3.6 percent this year, down from its 4.1 percent forecast in January.

It attributed some of the industry's sluggishness to the severe weather that kept consumers out of stores at the beginning of the year, and said it expects sales to grow "significantly faster" over the next five months.

"No retailer was immune to the doldrums witnessed during the first quarter, and as a result, the year's growth trajectory was impacted," NRF President and CEO Matthew Shay said.

The group estimates sales grew 2.9 percent during the first half of the year and expects sales will rise at least 3.9 percent in the second half.

NRF Chief Economist Jack Kleinhenz cited a strengthening employment picture and higher consumer confidence as reasons to be optimistic. But shoppers' lingering price sensitivity, as well as purchases of big-ticket items that reduce their discretionary dollars, will continue to weigh on the industry in the second half.

Shay also pointed to the bifurcation of the economic recovery, which has boosted confidence among home owners and those with stock market investments, but has lagged among low-income Americans. Earlier this month, executives at Dollar General and Wal-Mart commented on how their customer bases have yet to recover.

"I think while we see positive signs for the second half of the year this remains a tough environment," Shay said.

The organization's revised forecast comes as the back-to-school shopping season, the second-biggest selling season for the industry, is picking up. Last week NRF forecast total spending on back-to-school items will rise 3 percent to $74.9 billion this year, which it said is "good," but not "great."

According to the International Council of Shopping Centers, one-third of consumers have already started their back-to-school shopping—up from the 29 percent who had started at this time last year.

Looking forward, Shay predicted the remainder of the year, including the holiday season, will continue to be highly promotional.

He said there will be winners and losers across every category, whether it be discount or luxury, and the retailers who successfully integrate their online and in-store sales, select the right merchandise and sell it at the right price, and offer a high quality of service will come out on top.

"All of that goes back to creating a sense of loyalty and building a relationship with your customer," he said.

S&P 500 Rises to Record on Apple Results

The Standard & Poor’s 500 index rose to an all-time high, as Apple Inc. boosted technology companies and health-care shares rallied amid earnings. Boeing Co.’s results dragged the Dow Jones Industrial Average lower.

Apple surged to the highest since 2012 after signaling the long wait for new products is nearing an end. Biogen Idec Inc. rallied 11 percent after raising its full-year forecast, while Intuitive Surgical Inc. jumped 14 percent as results topped estimates. Boeing sank 2.3 percent as a cost for a tanker rekindled concern the planemaker would struggle with a new aircraft program. Juniper (JNPR) Networks Inc. tumbled 10 percent as its estimates trailed expectations.

The S&P 500 added 0.1 percent to a record 1,988.20 at 2 p.m. in New York. The Dow Jones Industrial Average slipped 16.52 points, or 0.1 percent, to 17,097.02. Boeing is the sixth-largest component of the Dow by weighting at 4.8 percent. Trading in S&P 500 stocks was 13 percent above the 30-day average at this time of day.

“The general tone of earnings has been positive not just on the bottom line but also top-line, and we’ve seen inflation numbers that gave comfort to those who believe the market will be supported by the Fed,” Russ Koesterich, chief investment strategist at New York-based BlackRock Inc., said via phone.

The S&P 500 rose yesterday after inflation data signaled the Federal Reserve won’t be compelled to raise interest rates in the near future and earnings reports boosted optimism about the economy. Chair Janet Yellen has said rates will stay low for a “considerable time” after the central bank stops its monthly bond purchases. It is on track to end them in October.

IMF Forecast

The Fed may have scope to keep interest rates at zero for longer than investors anticipate as inflation stays muted and a 2014 slowdown prolongs the labor-market recovery, the International Monetary Fund said in a conference call today.

The IMF cut its U.S. growth forecast for this year to 1.7 percent from 2 percent predicted in June, citing a first-quarter contraction.

The S&P 500 advanced 7.3 percent this year through yesterday amid better-than-estimated corporate earnings and central bank stimulus, as the U.S. economy shows signs of recovering from a 2.9 percent contraction in the first quarter. The gauge trades at 18.4 times the reporting earnings of its members, the highest since 2010.

Investors are also watching developments in Ukraine, where the Defense Ministry today said rebels in the eastern part of the country downed two government fighters.

The European Union yesterday threatened to restrict Russia’s access to capital markets and sensitive energy and defense technologies unless President Vladimir Putin expedites a probe into the downing of the Malaysia Airlines plane.

Earnings Scorecard

Of the members of the gauge that have reported results so far, 78 percent have exceeded analysts’ estimates for profit and 65 percent have beaten revenue projections, according to data compiled by Bloomberg.

“There may be some times when the geopolitical landscape hogs the spotlight but it’s always about earnings, and they’re coming in better than expected,” Karyn Cavanaugh, senior market strategist at New York-based Voya Investment Management LLC, said by phone. Voya oversees about $220 billion. “People say we’re at all-time highs and that we have to come down, but we’re not out of the ball park with valuations yet.”

The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 (SPX) options prices known as the VIX, fell 3.5 percent to 11.81.

Eight of the 10 main S&P 500 groups advanced today, led by a 0.8 percent gain among health-care stocks. The Nasdaq Biotechnology Index jumped 1.7 percent.

Intuitive Surgical rallied 14 percent for the biggest gain in the index. The maker of robotics used in surgeries reported profit that surpassed analysts’ estimates.

FCC Gives Speed Warning to ISPs

If you’re worried that you are not getting the Internet speed promised by your local ISP, then you will be happy to know the FCC is on the case.

The agency issued an advisory today reminding ISPs that they must disclose accurate information about connectivity speeds and services for home and mobile broadband. The Federal Communications Commission has received hundreds of complaints on the issue over the last several months.

The FCC adopted ISP transparency provisions in 2011 as part of the Open Internet rules. That Open Internet Transparency Rule remains active even though a federal court struck down some of the agency's Open Internet rules as part of the ongoing legal battle over net neutrality.

The agency would not comment on whether it had any ongoing investigations into ISP speed issues. Its transparency rule requires that ISPs make available information about expected and actual broadband speeds, pricing and fees, as well as network management practices, "such as congestion management practices and the types of traffic subject to those practices," the advisory reads.

"Consumers deserve to get the broadband service they pay for. After today, no broadband provider can claim they didn't know we were watching to see that they disclose accurate information about the services they provide," said FCC chairman Tom Wheeler in a statement. "The FCC's transparency rule requires that consumers get the information they need to make informed choices about the broadband services they purchase. We expect providers to be fully transparent about the details of their services, and we will hold them accountable if they fall down on this obligation to consumers."

Consumers should test their home broadband speeds using online tests and notify the FCC if their Net service doesn't meet its advertised speed. And to test mobile broadband speeds, the FCC has a Mobile Broadband Speed Test App for Android and iOS devices. Complaints can be filed on the FCC's site.