Friday's Final Takeaways: Retail Sales & Consumer Sentiment Slide, Tech Dominates

**Marley Kayden** (0:00)
Here's some final thoughts on the session today. We got the retail sales number this morning, and unexpectedly fell 6 tenths of a percent in July, marking the weakest monthly performance since May of 2025, and coming in well below economist expectations for a modest gain. The decline followed a two tenths increase in June, with weakness concentrated in areas including online shopping, autos, gasoline and electronics. Some of that weakness may be temporary, as Amazon's Prime Day shifted into June this year, contributing to a 2.2% drop in online sales in July, while earlier spending had also been boosted by the World Cup and tax refunds. Still, even if we strip out some of the volatile categories, retail sales were still down overall, suggesting that there was some genuine cooling in consumer spending. Consumer sentiment was also disappointing, with the University of Michigan's preliminary August index falling to 51 from 55.2 in July. That's well below the economist looking for 54.5.
Consumers are becoming more concerned about the economy and rising living costs, with one-year inflation expectations taking higher to 4.3 percent, while five-year expectations held at 3.3 percent. Taken together, the data suggests the consumer may be losing some momentum heading into the second half of the year, although the July retail sales decline includes some significant one-off factors. The bigger question for markets now is whether this represents a temporary pause in spending or the beginning of a broader slowdown. Our guests earlier in the show did not seem very concerned about the consumer, Sam. So we will see if this is a trend or not. But what caught your eye during the session today?

**Sam Vadas** (1:36)
Yeah. I guess we'll get more evidence next week with the retail earnings as well. Look, as I mentioned, we did clear a lot of hurdles this week, I would say. I mean, coming into it, there had been some concerns about a tech bubble and what the inflation picture was going to look like. But the earnings validated the AI trade and really alleviated some of the anxieties in the sector in many ways. We heard from a lot of companies across different crucial layers of the AI infrastructure build out across networking and opticals. And what that tells us is that the funding and demand remains aggressive. And that was further reinforced by Sandisk at its investor day yesterday, which gave major growth visibility into the next few years, which further fueled that rotation into memory names this week. The Cospi remembering did swing back into a technical bull market. As for the rest of the month, well, there is an expectation that this could be, as we were talking about, the calm before the late August storm when we will get NVIDIA, the PCE and Jackson Hole. There is a view that Kevin Walsh may have an easier job heading into that event after the more benign than feared inflation prints, coupled with the retail sales and data today with the consumer sentiment. The data does show inflationary pressures perhaps are cooling, reducing the urgency of a hike at least for now. That's why I guess small caps have been celebrating right now. But heading into next week, Marley, what are you going to be looking out for?

**Marley Kayden** (2:53)
Those retailer earnings, that's the big focus for me next week. We're going to get earnings from Home Depot, from Lowe's, Target, Walmart, TJX, and Ross stores. So we will get a pretty broad look at the consumer across all parts of the K. And with retail sales lower this month and sentiment remaining depressed, it'll be interesting to see if this consumer was still spending this quarter, despite lots of data telling us that they are tightening their belts. That seems to be consistent throughout each report, Sam, but how about you?

**Sam Vadas** (3:19)
Yeah, a couple of Chinese ADRs on the radar. And Alex mentioned Alibaba. Let's see if we see margin profitability recovery like we saw with JD. This is a big AI story. We want to see monetization proof. And then Baidu, that's a really interesting one because AI is its biggest opportunity but potentially its biggest threat because it's spending a lot to see those efficiencies at the cost of risking its own traditional search business.
Pretty much like Google, as we've seen, but that's what I'm going to be looking out for, Molly.

**Marley Kayden** (3:47)
Absolutely. That's going to wrap up this week for us.