The S&P Retail Select Industry Index: Ongoing Reversal to Bearishness

After the shocking quarterly reports from the U.S. major retailers such as Walmart (WMT) and Target (TGT), who admitted significant unsold inventory buildups as well as change of consumers’ shopping habits due to rising inflation, it’s time to think about the whole industry.

The S&P Retail Select Industry Index was launched on Jun 19, 2006 and it represents the retail sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Retail Index is an equal weighted market cap index.

SPSIRE reached its maximum of 7,941.75 on August 16 – shortly before the batch of namesake industry companies’ reportings. Thereafter the index began descending, reaching its low since May of 7,582. The technical indicators suggest the emerging bearishness, which may even accelerate if inflation data will keep scaring the investors.

The recently signed Inflation Reduction Act, which was passed by the Senate earlier this month and the House of Representatives last week, is, in fact, quite controversial document because, first of all, it goes on top of the mandated measures already applied by the Federal Reserve, and it actually costs an estimated $437 billion, with $369 billion going toward investments in "Energy Security and Climate Change", which means even more government spending, i.e. more inflationary money in circulation.

However, the congressional democrats said the legislation will soften the government deficit by raising $737 billion, imposing a 15% corporate minimum tax which is predicted to raise $222 billion, and prescription drug pricing which the Senate estimates will raise $265 billion.