Retail earnings, consumer spending come into focus

NEW YORK — After a week when investors were reassured by the government's assessment of the banking industry and its latest reading on the job market, Wall Street's focus turns to the consumer.

The coming week features first-quarter earnings figures from Wal-Mart Stores Inc., Macy's Inc. and other retailers and the Commerce Department's retail sales report for April. So far, the expectations are that the readings will help the stock market extend a two-month-old rally.

The government's retail sales tally follows April sales figures issued by the retailers on Thursday. Those reports showed spending generally fell, but by a smaller amount than in the previous months. Still, the recession weighed on consumers, who concentrated their spending on necessities such as groceries and health care products.

Economists polled by Thomson Reuters, on average, predict the government will report a 0.1 percent dip in retail sales from March's level.

"I would be surprised if retail sales come in anything other than expected," said Jeff Ivory, a partner at Stonebridge Financial Partners LLC in Bingham Farms, Mich. Meeting or even exceeding forecasts would provide additional strength to the market, he said.

Ivory said investors still have the mind-set that started the stock rally in early March. They're focused on whether economic data and corporate reports are showing incremental improvement, even if there are still signs of weakness.

"What we're seeing in aggregate is that bad news isn't necessarily bad news anymore," Ivory said. "It's all relative."

Consumer spending accounts for more than two-third of economic activity. So signs of stronger spending or upbeat outlooks from retailers would give investors incentive to keep buying.

Brett D'Arcy, Chief Investment Officer of CBIZ Wealth Management in San Diego, said a worse-than-expected reading on retail sales or disappointing results from a major retailer might lead to a short-term drop in the market, but only a series of bad reports over a couple of weeks would be likely to derail the rally.

Cincinnati-based Macy's first-quarter results are scheduled to be released Wednesday, while investors hear from Bentonville, Ark.-based Wal-Mart on Thursday. Analysts expect Macy's to post a quarterly loss of 23 cents per share, while Wal-Mart is expected to earn 77 cents per share.