Blowout quarters from US retailers Target and Lowe’s sent their share prices up sharply as Americans continue to spend despite the gloom hanging over the global economy.

Shares in big-box retailer Target were up 15 per cent to a new all-time high at the Wall Street open, while home improvement chain Lowe’s added 12 per cent; both posted stronger-than-expected sales growth during the second quarter.

Same-store sales rose 2.3 per cent at Lowe’s, ahead of estimates of 1.7 per cent. Target said sales at established stores were up 3.4 per cent, topping forecasts for a 3 per cent advance in the closely watched measure.

The results provided more evidence that spending by US consumers is proving one of the global economy’s few bright spots, as investors worry about recession risks and the Trump administration’s trade war with Beijing.

Last week Walmart, long considered a bellwether for middle-class spending, said US consumers were in “solid” financial health as it raised its outlook, and the US government released data showing retail sales remained robust.

This month’s inversion of the yield curve, which plots US government bond yields of different maturities and is seen as a harbinger of recession, sparked a new round of gloom. But Brian Moynihan, chief executive of Bank of America, told CNBC on Wednesday that he believed too much attention was being given to Treasury rates, pointing to consumer spending as a more important indicator.

“What it’s going to come down to is what’s really going on in the economy,” Mr Moynihan said. “The underlying consumer is doing well and making more money. They’re employed. And more importantly, they’re spending more money.”

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Target — which sells homewares, clothes, electronics and beauty products across the US — showed it was reaping rewards from investing in its online offering and same-day deliveries. It increased its full-year adjusted profit forecast to between $5.90 and $6.20 per share, compared with the prior range of $5.75 to $6.05.

Sales through Target’s digital channels grew 34 per cent in the second quarter on a comparable basis. Its same-day delivery service accounted for nearly 1.5 percentage points of the group’s 3.4 per cent comparable sales growth.

Lowe’s, which was forced to cut its profit guidance in May as rising costs hurt its first-quarter earnings, reported earnings per share of $2.15, adjusted to account for the wind-down of its Mexican operations. This was up from $2.07 in the same quarter last year, and ahead of analyst expectations of $2.01. Sales rose 0.5 per cent to $21bn from $20.9bn previously.

Marvin Ellison, Lowe’s president and chief executive, said the group had “capitalised on spring demand, strong holiday event execution and growth in Paint and our Pro business”.

The strong results for US retailers has not been universal. On Tuesday, concerns around the stand off with China were among the factors that prompted Home Depot, the world’s biggest home improvement retailer, to cut its sales forecast for 2019.

Donald Trump is mooting fresh tax cuts to stimulate business investment and consumer spending in the world’s largest economy as White House officials become increasingly nervous that the trade war will crimp GDP growth.

Via Financial Times