The Dow Jones Industrial Average closed up 228 points to 16,599 and the Nasdaq added 54 points to close at 4,860. Retail sales were up 0.2 percent and even though the consensus was for 0.3 percent, core sales were 0.5 percent higher, suggesting some underlying strength. Core sales exclude autos, gas stations and building materials. July was also revised higher to a 0.7 percent increase.
IHS Global Insight economist Chris Christopher wrote, “The consumer came back to life in the first two months of the third quarter after lying low in June.” IHS Global Insight forecasts that real consumer spending will be 3 percent for the third quarter and 3.3 percent for the fourth quarter.
Back-to-school was in full swing as clothing and clothing accessories stores were up 2.7 percent in August over August 2014 and increased 0.4 percent over July. General merchandise stores were up 0.6 percent over August of last year and 0.4 percent over July.
Aggregate income increased 0.7 percent, but since spending only increased 0.2 percent, those gas savings are not getting spent and instead going to savings.
UPS also led the market higher after the delivery service said it would hire between 90,000 and 95,000 workers for the holiday season to support expected volume increases. The stock jumped almost 3.6 percent to $100.52.
The gains were across the board in the stock market, with most sectors moving higher. For each declining stock, there were two advancing higher. In addition to reading the August sales as a sign of a strong consumer, a poor Empire Manufacturing report led many to feel that the Federal Reserve will delay its rate hike. Many believed the Federal Reserve was planning to raise rates at this Thursday’s FOMC meeting. Now it feels as if that move may be pushed off until later.
Looking ahead to Wednesday, Ascena Retail Group will report its earnings before the market opens.