After losses in May, the stock market has recovered in June. The SPDR Dow Jones Industrial Average ETF (DIA) tracks the Dow Industrial Average Index. As of June 14, DIA has risen 5.3% in June and 12.1% YTD (year-to-date). The Invesco QQQ Trust (QQQ) tracks the NASDAQ Composite Index. QQQ has risen ~5.0% in June and 18.3% YTD. The SPDR S&P 500 ETF (SPY) tracks the S&P 500 Index. SPY has risen 5.08% in June and ~16.0% YTD.
Consumer spending has taken a backseat in the first quarter. The US economy is facing headwinds like slower tax refunds, declining job numbers, and escalating trade tensions. According to the May retail sales report, consumer confidence remains strong. On June 14, the S&P 500 Index and the NASDAQ fell 0.16% and 0.52%, while the Dow Jones fell 0.07%.
The trade war is a major headwind for apparel retailers. Retailers have to increase prices due to higher tariffs. A 0.70% month-over-month decline in department store sales in May pulled down department store stocks on June 14. Macy’s (M) stock fell 0.96%, Nordstrom (JWN) stock fell 0.15%, Kohl’s stock (KSS) fell 1.9%, and JCPenney stock fell 0.88%. Kohl’s and Macy’s have fallen ~28.0% and 0.73% YTD.
Consumer spending accounts for two-thirds of the economy. As a result, consumer confidence and solid sales numbers help boost the economy.
Another escalation in the trade talks could hamper the consumer sector and the economy as a whole. With the struggling labor market, consumer spending could also decline, which could lead to lower retail sales.
There are a number of upcoming events in June that investors should watch. The events include President Trump’s meeting with Chinese officials, the FOMC meeting, and the jobs report for June.