Dow on the Rise Despite Poor Economic Reports

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Multiple economic reports came in below analyst expectations today, yet the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is climbing, continuing the "bad news is good news" trend. As of 1:15 p.m. EDT the Dow is up 65 points to 15,365. The S&P 500 (SNPINDEX: ^GSPC  ) is up four points to 1,687.

There were four U.S. economic releases today.

Report

Period

Result

Previous

Retail sales

August

0.2%

0.4%

Retail sales ex-autos

August

0.1%

0.6%

Producer price index

August

0.3%

0%

Core PPI

August

0%

0.1%

University of Michigan Consumer Sentiment index

September

76.8

82.1

Business inventories

July

0.4%

0.1%

Retail sales grew by a seasonally adjusted 0.2% in August, falling short of July's upwardly revised 0.4% analyst expectations of 0.5% growth. Excluding automobiles, retail sales grew just 0.1%, missing July's 0.6% and analyst expectations of 0.1% growth. Year-over-year retail sales are up 4.7%.

US Retail Sales Chart

US Retail Sales data by YCharts.

The largest drops came from building-materials suppliers and clothing stores, both of which dropped by roughly 1%.

The second report was the producer price index, which rose just 0.3% in August versus analyst expectations of a 0.2% rise. Year-over-year inflation dropped to a 1.4% gain, down from July's 2.1% 12-month change. Fool contributor Dan Caplinger took an in-depth look at the August PPI report.

The third key report was the initial reading of the University of Michigan's Consumer Sentiment Index, which fell from 82.1 to 76.8, well short of analyst expectations of 81.5 and a five-month low. Consumers cited rising mortgage rates, inflation worries, and fears of a potential battle over raising the debt ceiling for their worried future outlook.

The spate of weak economic reports, especially weak jobs numbers, have led some investors to believe that the Federal Open Market Committee will hold off on "tapering" -- i.e., the drawdown of its stimulative bond-buying -- for now. We will only have to wait until Wednesday to see what steps the Fed's policymakers take.

With so many investors focused on what the Fed is doing, long-term investors would do well to ignore the market's ups and downs, focus on their investing plans, and keep their wits about them. If the Fed sets tapering in motion and the market drops, opportunities will arise for long-term investors to pick up undervalued companies.

If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.


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