Retail sales up 1.2% in July, 2.7% year-over year

Although the number of coronavirus cases in the U.S. are still climbing, retail sales have seen a an increase of 1.2% in July and a 2.7% year-over year. The Final Round panel breaks down the details on what this means for the recovering U.S. economy.

Video Transcript

AKIKO FUJITA: We did get some economic data out this morning pointing to a mixed picture on the recovery front. Let's start with retail sales. They did rise 1.2% in July. That was the third consecutive monthly gain, but it was below that 2.3% that was expected.

A lot of question marks about how much of that momentum can be continued, especially with the enhanced unemployment benefit still yet to be extended, with no stimulus deal over in Washington. We also got additional information on industrial production. That's slowing to a gain of just 3% from 5.7% in June.

A lot of news to get through to today, but let's start by kind of breaking down the action on this Friday. I want to turn to Seana Smith, my co-anchor for the hour. Seana, what stood out to you?

SEANA SMITH: Hey, there, Akiko. Well, what's interesting here, you mentioned the fact that we got some of that economic data out today. And I think overall maybe if you would look at those headline numbers, you would think wow, that's actually pretty disappointing. But once you dig into the numbers and also take into account what has happened, especially with coronavirus over the past month or two, I think that these numbers are better than they look like on the surface.

So you mentioned that jump of only 1.2% in retail sales. It was below expectations, but I think it's important to highlight that we still are trending in the right direction. And I was going through a couple of notes out regarding the retail sales today. And Capital Economics, their note was pretty interesting, and it was titled, basically, that the recovery is losing pace, but it's not going into reverse. And that seems like that is enough for now, at least for investors.

And then also that consumer sentiment number holding steady in the first half of August. And when you take into account the rising number of coronavirus cases across the country, the fact that the extra unemployment benefit of $600 a week ran out at the end of July, yet consumer spending and how they are feeling seems pretty good at this point, I think flat is OK. And then we're seeing that reflected in the broader markets today.

I mean, we're slightly lower here, just falling below the flat line on all three of the major averages. But I think maybe some of the fear out there is that we would have had a bigger pullback. And the fact that we're not tight is investors saying that, hey, this data is fine. We are OK with it.

And then speaking of that sector action that you were just talking about, we're seeing that rotation again today into some of those more cyclical sectors and out of what investors have been favoring over the past couple of weeks, well, really over the past couple of months when it comes to tech, and the cyclical sectors continuing to perform well today. We have financials amongst the leaders. Industrials, materials all posting gains, all-- investors finding reasons-- reasons to buy all three of those sectors.

And then just drilling down into financials as we shift our focus from this week and onto next, I think the big question here for a lot of investors is whether or not we're going to see a bigger appetite here amongst investors to buy some of these banks, to buy some of these financial names. Because when you take a look at this week, yeah, financials did well. But when we see the big boost that we got in terms of what the treasuries did, you might think that hey, financials should have done a little bit better.

So I think this brings up the question about whether or not we can truly have a bull market without the participation of [INAUDIBLE] financials. And when you take into account that banks are well below their 52-week high, off over 20% from their highest levels that they've hit over the past year, I think that will be a focus for investors ahead, not only next week really, but for the next several weeks, as we look to justify this bull market that we're in right now.