Data is mixed, yet the real story is soft retail sector

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Uneven U.S. economic data is smacking around 10-year yields and stocks.

Treasury yields have moved up on better than expected initial jobless claims, which at 320,000 was the lowest since October 2007. Then 10-year yields move down as July industrial production and capacity utilization were both below expectations.

Utilities production was notably weak, yet that was probably due to lower air conditioning use during an unusually cool July.


1) What's up with retail? Now Wal-Mart disappoints.

Both Wal-Mart and Kohls guided lower, just a day after Macy's did the same yesterday. For its part, Wal-Mart said "the retail environment was challenging across all of our markets." Meanwhile, earnings were in line with expectations, but revenues were light.

The real problem was in same-store sales, which dropped 0.3 percent, well below expectations of a gain of 1 percent. Third quarter guidance of $1.11 to $1.16 is below expectations, as is the full year guidance of $5.10-$5.30; that checked in below previous estimates of $5.20-$5.40.

Next year's sales figures weren't much better: those were lowered to two to three percent, from previous guidance of a five to six percent gain.

Remember, Wal-Mart is 20 percent of total retail sales of publicly held companies.

David Berman of Berman Capital, who appeared with my colleague David Faber on Squawk on the Street on Monday, said retail earnings would be "horrible," and so far he is right.

Things were bad in department stores like Macy's; now they are bad in the biggest discounters like Wal-Mart. And we know teen retailers are bad already.

Berman made an interesting point: the consumer is not that weak, but the traditional retailers are. Consumers are are buying cars, houses, and they are buying goods on the Internet from companies like Amazon.

And they are buying home improvement items from companies like Home Depot and Lowe's, which will be out next week.

Buying is happening -- but just not from traditional retailers.

Still, it wasn't a completely bad morning for retailers. Dillard's beat yet revenues were light.

Kohl's reported in-line earnings, but cut 2014 EPS and Q3 EPS guidance was below expectations. The same store guidance was 0 to 2 percent for the current quarter, so there is some hope guidance might be conservative.

2) Third Point Reinsurance (TPRE) priced 22 million shares at $12.50, the low end of the $12.50-$14.50 price talk. This is the first reinsurance stock to come out since July 2007, when Validus Holdings came out. Third Point LLC (Dan Loeb) is the investment manager. This could be the last IPO until September, there is nothing else on the calendar. Not that it was a slow August: there were 14 IPOs this month.

3) There's talk that Apple may finally be near a deal with China Mobile to distribute a cheaper iPhone. Talks have been stymied by technology issues, and the reluctance of China Mobile to commit to the massive subsidies that come with selling the iPhone. China Mobile has 740 million users.

4) Japan's Nikkei fell 2.1 percent as Japanese authorities played down the prospect of a corporate tax cut.

By CNBC's Bob Pisani

  • Bob Pisani

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