Markets care more about hard numbers than anything else

  • Stocks are reacting to disappointing May retail sales and CPI.
  • Smaller-than-expected drawdown is also weighing on oil and energy stocks.
  • The choppy economic data makes the Fed's job much more difficult.
A customer browses goods at a Costco Wholesale store in New York.
Victor J. Blue | Bloomberg | Getty Images
A customer browses goods at a Costco Wholesale store in New York.

While the markets do not appear to be reacting to the terrible attack in Alexandria, it does appear to be reacting modestly to this morning's disappointing May retail sales and Consumer Price Index (CPI) report. In addition, a smaller drawdown than expected in crude oil inventories is dropping oil stocks 1-4 percent.

Bond yields dropped to their lows for the year on the CPI report and have been weighing on banks all morning, which are down 1-2 percent.

Most retail names are down roughly 1 percent on the weaker-than-expected retail sales.

May's CPI fell 0.1 percent, with year-over-year gains now down to 1.9 percent. Core CPI — which excludes food and energy...was up 0.1 percent, also below expectations.

What happened? It appears that a number of factors were involved: rents were lower than expected, along with consumer goods prices. Gasoline prices also dropped 6.4 percent.

Not surprisingly, that drop in gasoline prices weighed on May retail sales, which fell 0.3 percent compared to April, below expectations that sales would be flat. Gas station sales were down 2.4 percent month-over-month, but electronics/appliances were also down 2.8 percent after rising 2.2 percent in April.

While this weakness is bound to raise some questions, it doesn't warrant an all-out alarm, at least not yet. In retail sales, broader trends are still clearly intact — home improvement and e-commerce is continuing to gain at the expense of department stores. Other aspects are explainable — consumer electronics sales, for example, are notoriously volatile. And April retail sales were revised upward to a 0.4 percent gain, from 0.3 percent initially reported.

The markets took another turn lower at 10:30 am ET, when the weekly oil inventory report showed a smaller than expected drawdown in crude inventories. Oil, which had been trading around $46, promptly dropped below $45. the lowest level since the end of November.

Here's the good news: After two down days on Friday and Monday, the tech sell-off has abated. As a result, the odds of a broader market correction also appear to have abated.

The bad news: The choppy economic data — and the stubborn refusal of inflation to rise toward the Fed's making the Fed's job much more difficult. No one is changing opinion that the Fed will likely raise at today's meeting, but it's not clear how it will affect its future outlook.

Here's a key point to keep in mind: One of the main reasons the inflation and retail sales report were lower than expected is because oil has been dropping, and that has been affecting the inflation and sales outlook. Lower oil is good for the consumer, so we shouldn't be rooting for higher oil just to satisfy an inflation target.

  • Bob Pisani

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

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