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Retail sales give glum market a needed caffeine boost

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The latest spate of economic data is improving—and man, do we need it.

Wall Street opened higher Monday morning after U.S. retail sales for March, at up 1.1 percent, came in stronger than the consensus view of up 0.8 percent. More importantly, the February revision to up 0.7 percent was a huge increase over the 0.3 percent rise initially reported.

The bottom line: First-quarter personal consumption will be higher than expected.

Overall, however, last month's economic data—at least so far—has been choppy. ISM manufacturing and services data were a bit lighter than expected, and that has been a problem for the stock market. On the other hand, auto sales were better (up 3.1 percent in March), which is reflected in March's number.

And the most important number—March nonfarm payrolls, was roughly in-line with expectations, though there were revisions to the prior months.

The problem is that "modest" growth is not going to cut it; we need to see some evidence that the pace of the economy is picking up. We need "above consensus" numbers.

That box was checked by last month's retail data. To coin a phrase from The Cars hit song, it was just what we needed.

1) Citigroup's better than expected earnings and revenues are lifting financials. The main point here is that expectations were already very low. CEO Michael Corbat said that both Citi's "consumer and institutional businesses performed well and we grew both loans and deposits while holding the line on our expenses."

Northeast Regional bank M&T Bank also jumped over the market's low bar. CFO Rene Jones noted that the first two months of the quarter saw lower than normal levels of activity "followed by a rebound in March."

2) While volume was heavier than normal last week (particularly at the NASDAQ), it's unlikely we will see a repeat this week. Passover starts tonight, and the markets are closed on Friday. Many traders have taken the whole week off; (here in the metro New York region, the subway was definitely less congested than usual).

3) The above, however, doesn't mean we won't get any stock movement this week. Besides earnings, China will report first quarter gross domestic product (GDP) figures Tuesday night; the expectation is for growth of 7.3 percent.

4) European Central Bank (ECB) head Mario Draghi was trying to talk down the euro over the weekend. He argued that the higher the currency rises, the more likely the ECB will do quantitative easing, perhaps in the form of a negative deposit rate. Essentially, that would be a tax on banks that park money with the ECB.

5) There have been reports that the U.S. Securities and Exchange Commission (SEC) may be considering a pilot program for a limited test of the "trade-at" rule, which would require dark pools to provide price improvement, rather than just the best available bid or offer.

Pilot programs are not very well liked at the SEC (I am told there are over 50 of them), but in this case a pilot program would have the advantage of giving the appearance of doing something without actually doing something.

Another advantage: there is a provision in the JOBS Act asking the SEC to do a pilot program that would allow certain low volume, low market capitalization stocks to trade in increments other than a penny. This could likely be incorporated into that program.

—By CNBC's Bob Pisani

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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