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Why Ford Stock Is Rising Today

By John Rosevear – Jun 16, 2020 at 11:10AM

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Good retail news suggests that auto sales are doing better than expected.

What happened

Shares of Ford Motor Company (F -3.60%) are rising today, up by 4% as of 10:15 a.m. EDT, amid a broad market rally following a report that U.S. retail sales rose much more than expected in May. 

So what

The U.S. Commerce Department reported today that while total retail spending remains below pre-coronavirus levels, retail sales jumped 17.7% in May from April. That was the biggest month-to-month increase in records dating back to 1992, the department said, and well ahead of analyst forecasts. 

A red Ford Super Duty pickup in front of Ford's Kentucky Truck Plant in Louisville.

Ford's pickup truck factories are working at full speed to resupply dealers. Image source: Ford Motor.

While May's total retail sales of $486 billion were still lower than normal (pre-pandemic) levels, the result is a sign that the economic impact of the pandemic likely peaked in April, and that consumers have returned to stores more quickly than expected. 

That's good news for Ford and its rivals. As auto investors know, auto sales are a leading economic indicator: They tend to rise early in recoveries as consumer confidence grows. Simply put, the strong May retail result suggests that auto sales -- and auto pricing -- were also likely strong in May, and that's why Ford's shares are up today.

Now what

We won't know for sure how Ford's sales are doing until early next month, when the company reports its second-quarter sales totals for the U.S., China, and Europe. But given that the automaker's guidance called for an ugly second quarter, it's no surprise to see investors having a strong positive reaction to upbeat data points like today's.

John Rosevear owns shares of Ford. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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