The Daily Difference: Market Update January 16, 2014

Retail sales handily offset any effects of last week’s employment report: overall, the month over month change was 0.2% vs. a consensus of 0. The underlying numbers were even stronger, up 0.7% without autos (one of the most volatile components), suggesting retail earnings for the fourth quarter will be robust. The strongest sectors were clothing, food services, beverages, and health / personal care... likely higher margin items (compared to commoditized components such as fuel). Earnings: The earnings season got off to a strong start, with Bank of America (BAC) reporting strong earnings and profit margins along with Wells Fargo (WFC). The expectation is that financial shares will outperform across the board, although a good portion of BAC and WFC’s profits were directly attributable to loan-loss reserves, suggesting the reported earnings numbers are not of the highest quality.

World Bank: Global shares are up due to the World Bank’s most recent forecast of 3.2% growth in the global economy, up from their 2013 prediction of 2.4%. The majority of the projected increase in growth is attributable to an increased outlook for developed markets.