Rates flat as overall retail sales plummet, but not surprisingly, online sales soar

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Published Date 5/15/2020

April retail sales slumped more than was thought, -16.4% on forecasts of -11.2% and March sales, which was the record decline revised from -8.7% to -8.3%—excluding auto sales down 17.2% on thoughts of -8.6%. The control group (which excludes food services, car dealers, building-materials stores and gasoline stations), fell 15.5% on estimates of -3.7%. All but one of 13 major categories decreased, led by a 78.8% drop at clothing stores and a 60.6% decline at electronics and appliance stores. The only category to record a gain was non-store sales -- including online sellers such as Amazon.com -- which increased by 8.4%. Stores shut and people staying home were the key, but the slide is concerning as it doubles what the experts were projecting. Food and beverage stores, which saw sales surge in March as Americans stocked up on essential goods, fell 13.1% in April. Restaurants and bars were down 29.5% from the prior month, with sales about half the level of April 2019. The worse than expected numbers shouldn't be too much of shock, with stores closed and fear of getting sick is not easy to forecast, we have never experienced this situation. The monthly sales total of $403.9B was the lowest since 2012. Retail sales were down 21.6% from April 2019 after a 5.7% year-over-year decrease in March.

The NY Empire State manufacturing index was a little better than forecasts, -48.5 on estimates of -65 and up from -78.2 in March.

April industrial production expected -11.5% was in line at -11.2%, manufacturing down 13.7%. Capacity utilization declined to 64.9% from 73.2% in March.

At 9:30 am ET, the DJIA opened -177, NASDAQ -86, S&P -23. 10 yr note 0.60% -2 bp. FNMA 3.0 30 yr coupon at 9:30 am ET +2 bps from yesterday's close, and +10 bps from 9:30 am yesterday.

At 10:00 am ET, the U. of Michigan midmonth consumer sentiment index was expected at 66.0 from 71.8 on the final April index; as reported, the index at 73.7 was surprisingly better, but no big deal in the markets.

Companies that moved offshore to avoid U.S. taxes may qualify for Fed help, tax lawyers said. Fed guidelines are meant to help companies with big footprints in America, regardless of tax-avoidance strategies, and many inverted firms retain U.S.-based workforces, even though their legal addresses may be in Bermuda or Ireland. If any receive aid, a political storm is sure to follow.

Pelosi is pushing ahead with a vote on a $3 trillion Democratic-only virus relief bill Friday despite the misgivings of some liberals and moderates in her party and the fact it has no chance of ever getting signed into law. Republicans and some Democrats want to wait longer before committing another $3 trillion in debt that is exploding and will become a serious problem in the coming years. There is no date for getting it done. McConnell (Senate leader) dismissed the legislation, known as the Heroes Act, as "a $3 trillion left-wing wish list."

Technicals: the 10 yr is testing its key resistance at 0.60% this morning, as you know that is a very critical level that has stopped any attempts to move lower since the beginning of April on numerous attempts. Early this morning, the note fell to 0.596%. Even with the very soft data this morning, the note at 10:00 am ET is at 0.62%.

Source: TBWS

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