Dollars and Sense: Economic growth but no big boom

Retail regales. Last week retail was in focus. As we’ve discussed before, retail companies often have different year-ends than the Dec. 31 year-end of almost all other companies because they need extra time to fully account for holiday sales. That means retail companies are always the last to report during the quarterly earnings cycle. Last week’s spate of reports told us our economy is getting stronger, but is not booming. We also learned that how healthy retail appears depends very much on where you look. On Tuesday, for example, Dick’s Sporting Goods cut its outlook for the rest of the year, and shares fell 17 percent. Staples’ stock plunged after the company reported a 43 percent drop in profit. The parent company of T.J. Maxx and Marshall’s fell more than 7 percent after reporting weak sales. Urban Outfitters reported lower-than-expected earnings and sales. None of that sounds very good. But then came Wednesday, and news that Tiffany’s surged more than 8 percent after the luxury retailer said net income jumped 50 percent, easily beating Wall Street estimates. Later in the week we learned Best Buy rose more than 2 percent after its earnings beat Wall Street estimates. Dollar Tree gained more than 7 percent after reporting its income rose almost 4 percent. L Brands, which owns store brands such as Bath and Body Works and Victoria’s Secret, rose more than 1 percent. As you might expect, the markets dropped significantly on Tuesday, but then rose on Wednesday, Thursday, and Friday.

Housing rebounds. Another segment of the economy lots of us watch is the housing market. Because a sick housing market helped cause the financial crisis, it was no surprise that housing was a lagging economic indicator in the recovery. But this week, we learned existing homes sales jumped 1.3 percent in April, fueled by a jump in condo sales.

M&A on the rise. It’s interesting to note we are seeing more merger and acquisition announcements as the economy recovers and companies feel more comfortable putting their cash to work instead of holding it on their balance sheets. AT&T agreed to buy DirecTV for about $48.5 billion. Shares of both companies dropped on that news. British drug maker AstraZeneca rejected what U.S. rival Pfizer called a “final” takeover offer. That sent shares of AstraZeneca down, while Pfizer’s shares rose. Google climbed more than 1 percent on a report that its YouTube unit will buy video game streaming service Twitch for $1 billion.

Slow and fitful. All of the above is to say we are seeing signs of recovery, but don’t expect a boom any time soon. The Conference Board said its index of leading indicators, a measure designed to gauge the economy’s future health, rose 0.4 percent in April. The group also revised upward its March number, to 1 percent. That’s welcome news after a pretty bleak January and February, a period in which the economy barely registered measurable growth. Right now I’m hearing from analysts that they expect growth to remain at about 3 percent for the rest of the year—growth, but definitely not a boom.

The week ahead. It’s a short week because of the Memorial Day holiday. The markets are closed today and lots of people have the day off. Still, the rest of the week promises to be pretty busy. We’ll get April’s durable goods report Tuesday, and the Conference Board will release its consumer confidence report. We’ll also get a revision of the first quarter gross domestic product number, as well as the April personal income number. So we’ll see lots of new data this week, and for data geeks like me, that’s always fun.