Mixed Review for Consumers in August

After all the fireworks in the beginning of the month, August ended with a bit
of a whimper on the one hand, but a bang on the other. I loved the headlines
that spewed forth just minutes after the markets closed Thursday night: U.S.
stocks rise to close turbulent month, followed by, Major indexes drop for fourth
straight month, as well as, Stocks gain, end worst month since flash crash. Oh,
and S&P posts best eight-day gain since 2009. Wow! I just didnt have that
eight-day record in my head, did you? Of course, Thursdays 1%-plus decline for
the major market averages put an end to that. The ups and downs of the headlines
mimic the way the markets were moving in August as we had to contend with the
debt-ceiling debate (or food fight), the S&P credit downgrade, a monster week of
volatile market declines followed by a pretty good recovery, and daily
volatility that saw the Dow swing from high to low and back by 2% or more on all
but six of the months 23 trading days. Before August, wed had only three such
2%-plus days in the first seven months of the year. Heck, on Aug. 9, the Dow
went swinging more than 6%, or more than 662 points! Consumer confidence (not
surprisingly) stinks but, as I have said before, watch what consumers do, not
what the surveys say they say theyre doing. For one thing, theyre spending
money, apparently. We also learned that Dillards (NYSE: DDS ) and Ross Stores
(NASDAQ: ROST ) same-store sales were up 4% in August. Target s (NYSE: TGT )
were up 4.1%. Macys (NYSE: M ) were up 5%. Limited s (NYSE: LTD ) were up 11%.
Gap (NYSE: GPS ), on the other hand, was down 6%. But in general, retail sales
were strong in August. Who knew? Economic and market action provided further
grist for the mill of a constantly churning Wall Street. The retailers numbers I
just cited had the market in a tizzy, and when the ISM manufacturing number came
in lower in August but higher than anticipated, the stock market went tearing
higher until, once again, cooler heads began to take a look at the innards of
the report. Despite a slight rebound in activity at the end of August,
manufacturing, which has led this recovery, is not currently in great shape. The
markets ratcheted down after that bit of rationalization came to the forefront.
So, where are we? Fed chief Ben Bernanke gave no clues or even hopes for further
Fed action that might be thought of as QE3 or even QE2.5 when he last spoke. And
while the data on incomes and spending in July looked good, we still have more
data to come on what happened during the past month. Unemployment remains a big
problem, and its going to be the next big battleground as weve seen already just
in the scheduling of next weeks presidential address to Congress on that topic.
Its worth noting that the White House announced Thursday that it estimates
unemployment will go down a wee bit by years end to 8.8% and then to 8.2% by the
end of 2012. Thats hardly low, but it might simply be a case of the White House
setting low expectations that it can then beat, much the way companies now seem
to chronically underestimate future earnings.