UNITED STATES - It’s been an interesting ride for investors as of late. With news of the Dow Jones Industrial Average breaking a new record for the first time in its 118-year history before the July 4 holiday, analysts are finally seeing concrete proof that the U.S. economy is on the path of recovery. For some however, this milestone achievement might not move the needle in terms of consumer spending.
“It’s really hard to see in our business today … that it’s gotten any better,” said Wal-Mart U.S. CEO Bill Simon in an interview with Reuters, suggesting that the spur in U.S. employment growth has failed to increase consumer spending so far. Last week, the U.S. Labor Department reported that employment growth increased in June with an additional 288,000 jobs, and the unemployment rate neared a six-year low, according to NBC News. Subsequently, the Dow reached 17,000 for the first time ever.
“The headline jobs number and underlying data reinforce the fact that the domestic economy is thriving,” said Todd Schoenberger, managing partner at LandColt Capital, during the historic day, according to USA Today. “The markets will enjoy this data, which should push the broader averages to higher highs today.”
“People like to chase trends, and people are more likely to buy when they are thinking about the market than thinking about something else such as the World Cup,” said Odean, according to Wall Street Journal’s MarketWatch.
For the week so far however, the Dow has lost 161.64 points, or 1 percent. On Tuesday, the Dow closed at $16,906.62. Check out how the Dow has been performing over a five day period...
"We've reached a point where it's not getting any better but it's not getting any worse - at least for the middle (class) and down," said Simon.
Though it appears that the domestic economy is starting to hit its stride, Simon says that the recovery is not giving ordinary consumers the confidence to increase spending. Wal-Mart is continuing to find ways to gain positive same-store sales and positive traffic in an increasingly competitive environment, but will these adjustments in strategy be enough to give the company a financial boost?
“We’ve reached a point where it’s not getting any better but it’s not getting any worse – at least for the middle (class) and down,” continued Simon, Reuters reports.
"They're adapting to what has been a difficult macroeconomic situation," explained Simon.
Shopping habits for lower- and middle-income consumers have changed, Simon suggests, which may “not be the best thing in the world for a retailer.” Back to school events and holidays like the Fourth of July had shoppers splurge on items, but pulling back in between.
“They’re adapting to what has been a difficult macroeconomic situation,” explained Simon.
It hasn't been difficult for Wal-Mart alone. June sales at Costco and Target stores open for at least a year also fell below expectations, according to Reuters.
While it remains to be seen if the Dow will make a rebound again, it looks like it’s going to be a tough fight all around to keep shoppers shopping.
