U.S. retail sales came in flat for the month of September versus an expected 0.2% increase.

Video Transcript

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BRAD SMITH: We're also tracking retail sales out this morning. Retail sales remaining unchanged in September. [INAUDIBLE] economists forecasts of a 0.2% rise here. And so with regard to all of the different data that's come out on the front of retail more broadly, or the prices that consumers are paying here, and trying to get an answer to the question of whether or not inflation has peaked-- and where-- consumers are still having to buy in and in certain categories necessities.

That's still remaining strong, and rightly so. But it's really some of the discretionary areas that we have to keep a close eye on-- especially going into the holiday season-- to see where there might be that pullback in consumer sentiment or spending propensity within those particular parts of the industry as well, Soz.

BRIAN SOZZI: Guys, I wish you could see my notepad. I have so many notes this morning, because it's crazy. But I think one of them that really ties everything together-- the bank earnings and retail sales. Again, this is-- really, now, we're getting new evidence of how the Fed is starting to impact this economy. And it looks like it really is starting to happen in a big way.

Zoom into this retail sales report. You see weakness in furniture sales. You see weakness in auto sales, like we just mentioned over at Wells Fargo in their most recent quarter. These are big-ticket purchases that tend to go on credit cards, by and large. You're not necessarily going into a furniture store and plopping down $10,000 to go buy a couple of new couches and a recliner.

So the cost of buying these items is going up significantly, and it looks like consumers are just saying, you know what? I'm just not buying this stuff for whatever reason. Maybe I don't need it. Maybe last year, I would have went out and bought it because financing costs were cheaper. But this is a big problem, and it's going to be a big problem for retailers and this economy moving forward.

And now you better understand, I would argue, while the market continues to be in a bear market-- continues to be under significant pressure-- is because of stats and real-time things that are happening to consumers, just like we saw in this retail sales report.

BRAD SMITH: Yeah. And I want to marry that as well, Soz, to some of the bank earnings that we were talking about, because Jane Fraser-- Citi CEO-- actually outlined it, and talked about the personal banking side, and specifically within that, the card spending, saying that US personal banking further solidified its growth trajectory.

Double-digit revenue growth in both of their cards' businesses, and what that should signify-- especially with the correlation of how consumers are spending-- is that they are leaning further into some of their card spending right now to try and figure out, OK, how do we then make sure that our cash pile-- if we do have a strong balance sheet or are just trying to solidify our balance sheets at home-- that we still have cash that we can lean onto in the event of an emergency, in the event of some other circumstance?

JULIE HYMAN: And I just wanted to mention, by the way, if you exclude motor vehicles parts and gas, the number actually saw more of an acceleration. So that's just something to point out here. If you look at the so-called control group, it saw 4/10 of a percent advance, which is better than estimated. And there were revisions higher for the prior month. So this is not all bad news here within this.

And you did see increases in areas such as non-store retailers, i.e. e-commerce. Department store sales up 1.3%, right? Where does that come from? I don't know. But yes, there were some areas of increase. So just to make that point--

BRIAN SOZZI: Not coming from Kohl's, Julie. Not coming from Kohl's!

JULIE HYMAN: Well, it's coming from somewhere, obviously, because--

BRIAN SOZZI: Somewhere. Maybe Macy's.

JULIE HYMAN: I don't know. But we don't get that granularity here. Just wanted to put a fine point, though, on as we get this data that does show OK, we've got hot inflation. OK, we've got retail sales that are moderating in some areas.

The market has just been going crazy, for lack of a better term here, or just really having these wild volatile swings on a day-to-day basis. And again, to come back to what we saw yesterday, take a look here at the Wi-Fi interactive-- which I have pulled up-- and just that enormous swing. The Dow really the prime example of this-- opening up sharply lower yesterday, down by 500 points here, after we got that CPI that came in hotter than estimated, showing that the Fed and cementing the base case among Wall Street that the Fed is going to raise 75 basis points.

And then, somehow, coming back by day's end! Are things oversold? Had stocks priced in the scenario for the Fed being super aggressive? Maybe. I don't know! Who knows if it was a fundamental move that we saw yesterday in markets, or if it was merely a snapback.

And there are all the groups in the S&P 500 that we saw yesterday, with financials leading the gains-- which maybe also was some preliminary buying ahead of today's numbers. But it's still confusing to me.

BRAD SMITH: There's a lot to take away, though, from even the early earnings that we've received this week, whether that's Delta and the demand that they're seeing. That demand is different than some other businesses would be seeing, because, as they were lining up, and Ed Bastian telling us that it's countercyclical, the airline's recovery right now, versus some other parts of consumer spending. And then you get even more of the consumer data.

Sure, a lag on the economic data, but then also a little bit forward-looking in what we can actually extrapolate from some of these bank earnings as well, whether that's the most credit touching banks, or whether that's the banks that are giving out home loans or auto loans. And that really gives us even more of the insight into how different companies are going to be interfacing with consumers, even throughout this potential recession, and what that may look like as the consumers are looking to shore up their own confidence as well, leading into that.