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U.S. stocks flat amid minor retail sales improvement

TradingPub Admin | May 13, 2013

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One interesting part of stock trading education is when equities do not respond significantly to news that would generally elicit a greater change.

For example, on May 13, U.S. stocks were largely unchanged even though retail sales for the month of April were higher than expected by economists, according to Bloomberg.

The blue-chip S&P 500 Index was practically unaltered, as it was less than 1 point higher at 1,633.78 at 4 p.m. in New York, the media outlet reports. The Dow Jones Industrial Average, another highly-visible index, was largely unchanged, finishing the day 0.2 percent lower at 15,091.91.

Retail sales record modest increase
Data provided by the U.S. Commerce Department indicated that in April, retail sales increased by 0.1 percent. While this represented only a minor improvement, it surpassed the predictions of economists polled by various media outlets.

For example, market experts who took part in a survey conducted by Bloomberg predicted that the figure would fall 0.3 percent during the period. Participants in a poll conducted by Reuters had the exact same prediction.

Strong core sales
In addition to retail sales rising 0.1 percent, core sales increased 0.5 percent during the report, according to Reuters. This figure excludes transactions involving building materials, autos and gasoline.

"Recent data has been weak, so to see some sturdiness is important and needed in order for us to move materially higher," Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott, told the news source. "But given the strength we've had over the past few weeks, it isn't surprising that trading is a bit indifferent today."

Rally speculation
The U.S. equity markets have benefited from broad rallies. The S&P 500 Index has surged 14 percent so far this year, and last month, managed to rise above a reading of 1,600 for the first time.

The benchmark group of stocks has managed to generate returns rivaling those enjoyed during the tech boom of the 1990s, as data compiled by Bloomberg reveals that since March 2009, the S&P 500 has surged an average of 26.2 percent per year.

This has happened as the valuations of the stocks in the index are 28 percent lower during this bull market, according to the media outlet. The combination of the sharp appreciation and low valuations has generated significant speculation, and bears have stated that the low price-to-earnings ratios indicate that market participants are less optimistic about the broader economy than they could be.

"The size of this rally's not what keeps me up at night," Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, told the news source during a May 8 phone interview. "That was a tremendous rally then, too, but I'm not getting all nervous based on the size of the rally this time, because we're not there yet in terms of valuation."

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