Consumer spending hinges on Thursday's Walmart earnings: trader

By Alan Valdes, director of floor operations at Silverbear

Well, here we are. Earning season is about done—four weeks left ’til the official end of summer, Labor day. Volume is a trickle of what it should be on an average day. And, why not? Vacations should be the only thing on traders’ minds.

Most trading desks usually have the second-string guys manning the phones this time of year. Therefore, the markets should be dead in the water, right? Wrong! For the second time in a week, all three indices (the DOW, S&P and NASAQ) closed at all-time highs.

Last week jobs numbers showed us that 151 million Americans are working (121 million full-time). Never in the history of our country have so many people been employed. Inflation numbers—out today—show price inflation remains tepid.

Energy stocks have taken it on the chin this summer with a glut around the world. OPEC is talking about cutting production (though, it will probably be just that: “talk”). Consumers have benefited from this glut with cheap gasoline prices at the pump all summer. Where are consumers spending these millions of dollars in savings?

Here’s the real look at consumer spending

Come Thursday, we will get a real-time look at one of the best barometers of consumer spending: Walmart. The retail giant reports Q2 earnings. For traders, this is the best number to watch in order to get an up-to-date picture. With 100,000,000 shoppers a week, Walmart gives us a real-time picture into the health of the consumer.

Every hour of every day, (except Christmas, when Walmart closes to give its 2.2 million employees a well-deserved day off), Walmart sales total $36,750,000. Yearly sales total $485,651,000,000. Walmart revolutionized shopping in America and made ghost towns out of many of small town Main Streets. It will now try to catch up to Amazon’s online sales of $99 billion. With just $14 billion in online sales, the retail giant sees the writing on the wall. It’s spending $3 billion on Jet.com and investing $1.1 billion in e-commerce in general.

Economists will be looking for a 5% drop in profits, and revenue is expected to tick up 10 base points. Share prices YTD are up 20%. My guess? Don’t bet against 100,000,000 million shoppers a week!