US consumer OK, but be careful: Yardeni

Edward Yardeni, president of Yardeni research, said Thursday that he may be bullish on the U.S. consumer and economy, but he still believes investors need to pick their spots.

"The market has become a market for stock pickers. You really have to know your companies. While the overall consumer can be cheap, that doesn't mean you buy anything related to the consumer," Yardeni told CNBC's "Fast Money: Halftime Report."

Retail earnings, often used as a thermometer of how well consumers are doing and where they are spending their money, have been a mixed bag.

For example, Dow component Home Depot posted quarterly results that handily beat analyst expectations on Tuesday, while retailer Target on Wednesday missed expectations on both earnings and revenue.

"If you look at retail sales on a year-over-year basis, adjusted for inflation, it's up 4 percent," he said. "I think the consumer is in good shape. I like the U.S. economy. I like the U.S. as a place to invest; on a global basis, it looks great."

U.S. equities have declined this year, with the Dow Jones industrial average and the S&P 500 index both dropping nearly 5 percent. The Nasdaq composite, meanwhile, has tumbled close to 9 percent year to date.

Ed Yardeni, president, Yardeni Research
Adam Jeffery | CNBC
Ed Yardeni, president, Yardeni Research

"I think we all got ambushed at the beginning of the year by two Fed officials," Yardeni said, referring to Fed Vice Chairman Stanley Fischer, and San Francisco Fed President John Williams. "They both started talking about increasing the fed funds rate four times this year."

"As soon as the market heard two of these key officials saying 'the market doesn't understand we're really intent on four rate hikes,' it got hit."

The central bank raised interest rates for the first time in nearly a decade in December. However, the Fed will have to stay put this year, Yardeni said. "If they raise rates because the stock market is doing a little better and the economy is looking good, the stock market and commodity market will get hit again."