Stocks rise, buoyed by big retail sales gain

Americans are ramping up their retail spending

Americans largely shrugged off higher prices last month and stepped up their spending at retail stores and online, providing a boost to the economy.

Buoyed by solid hiring, healthy pay gains and substantial savings, Americans ramped up their spending at retail stores and online shops last month. Some of the increase reflected the impact of higher prices, and there were signs that Americans have started to seek out cheaper options.

Yet the October gain the government reported Tuesday was solid enough for most economists to anticipate holiday shopping jumping by a record amount this year.

The data also illustrates a key factor behind the supply chain backups that have left dozens of ships waiting to unload at U.S. ports: Americans are buying a tremendous amount of goods, from appliances to electronics to furniture. Retail and food service sales have surged 16.3% compared with a year ago. That is a record high excluding several months during the spring when federal stimulus checks caused sharp spikes in spending.

From September to October, retail sales jumped 1.7%, the U.S. Commerce Department said Tuesday. That was the biggest month-to-month gain since March and was up from a 0.8% increase from August to September.

The increase occurred just as retailers face a host of challenges. Many have had to sharply raise pay to find and keep workers, thereby increasing their labor costs. And some are scrambling amid overwhelmed supply chains to keep their shelves stocked.

“Even with all these problems, we’re still on track here for a banner year,” said Tim Quinlan, an economist at Wells Fargo.

After adjusting for inflation, Quinlan estimates that retail sales in November and December will be 10% higher than a year earlier, which would be the biggest such gain in seven years.

Last month, sales soared 3.8% at electronics and appliance stores and 4% among online retailers. Those increases suggested that many Americans are already doing their holiday shopping, possibly to avoid higher prices and supply shortages closer to the holidays.

Stocks closed higher on Wall Street on Tuesday as investors reviewed solid earnings reports from big retailers and a surprisingly strong report on consumer spending.

The S&P 500 index rose 18.10 points, or 0.4%, to 4,700.90 and is sitting just below the record it set on Nov. 8. The Dow Jones Industrial Average rose 54.77 points, or 0.2%, to 36,142.22. The Nasdaq rose 120.01 points, or 0.8%, to 15,973.86.

Technology stocks did much of the heavy lifting for the benchmark S&P 500, which had slightly more gainers than losers. Chipmaker Qualcomm rose 7.9%.

A wide range of companies that rely on consumer spending made solid gains. Home Depot rose 5.7% after the home improvement retailer reported surging sales and solid profits in the third quarter amid a hot housing market. The results also lifted competitor Lowe’s by 4.2%.

Several companies that depend on consumer spending rose. Online crafts marketplace Etsy rose 5.1%. Nike rose 1.8% while Coach and Kate Spade parent Tapestry gained 1.5%.

The nation’s largest retailer, Walmart, also reported solid financial results while raising its profit forecast, but the stock fell 2.5% and gave back some of the big gains it has made in the last few weeks.

Bond yields edged higher. The yield on the 10-year Treasury rose to 1.64% from 1.62% late Monday.

Investors received another encouraging economic update from the Federal Reserve, which said industrial production rebounded in October with a 1.6% gain. The gain followed a 1.3% plunge in September.

Compiled from Associated Press reports.