First it was auto the auto parts suppliers getting hammered after O'Reilly Auto announced unexpectedly poor results (duly blamed on "mild weather" and weaker than expected Hispanic spending) and tumbling the most in 5 years, and then it was the retail REITs turn, after channel checks at Prodco Retail Traffic Analytics revealed that the US consumer continued to hibernate into the July 4th weekend with North American store traffic 8.1% lower in the week leading up to the July 4 holiday weekend, a steeper drop than the year-to-date trend of down "only" 6.6%. In the week ending July 1, with footfall at luxury retailers down 9.7%, and 8.3% weaker at apparel stores, Bloomberg reported.

The justifications for the abysmal results were legion: retail 2Q sales results may be impaired by weak traffic, as consumers still prefer digital, and they swap shopping for travel, dining out, or outdoor recreation. Shopping less in-store continues to hurt retailers' ability to prompt unplanned purchases.

The companies impacted the most included retailers such as Abercrombie & Fitch, Macy's, J.C. Penney, Tailored Brands and Nordstrom reported declines in traffic and same-store sales. And since they're among the tenants of REITs Kimco and General Growth, the the S&P 1500 retail REITs index fell as much as 2.8%, the most intraday in two months, with all 24 members declining: KIM is the worst performer, down as much as 5.6%; while other laggards include PEI, CDR, WRI, CBL, GGP, KRG, SKT, SPG, and MAC

Based on the above, it appears that 2Q retail sales will once again be hurt by overall weak spending even as Amazon continues to wreak havoc among the traditional retail sector. Abercrombie & Fitch, Macy’s, J.C. Penney, Tailored Brands and Nordstrom all reported declines in traffic and same-store sales.

And while many would be first to blame the (near) monopolistic dominance of Amazon in the online retail space, reading between the lines confirms that US households are aggressively shrinking their overall spending basket, as store checks by Retail Metrics throughout the month found continued soft traffic, although the May retail deterioration appears to have stabilized at a low level. This, despite elevated promotional levels at both specialty apparel retailers, and department stores,

Bloomberg adds that while June is typically a quiet month as chain stores transition from summer apparel and seasonal selling to clearance in order to make way for early fall and back-to-school merchandise, June has been extremely eventful month with additional store closures, bankruptcy filings, layoffs, acquisitions, management changes and exploration of strategic alternatives as retail industry undergoes a "broad-based transformation."

Finally, here are some sell-side views:

Wells Fargo:

• June store traffic decreased 4.7%, a modest improvement from -5.1% in May, according to same-store data from ShopperTrak.
• First 4 weeks of June each showed sequential improvement in traffic; however, week 5 fell 7.1%, which dragged down monthly traffic by almost a full point
• Pricing remained under pressure in June, based on Wells Fargo channel work

Bloomberg Intelligence:

• Retail 2Q sales results may be impaired by weak traffic, as consumers still prefer digital, and they swap shopping for travel, dining out or outdoor recreation
• Shopping less in-store continues to hurt retailers’ ability to prompt unplanned purchases
• In the week ending July 1, footfall at luxury retailers was down 9.7%, 8.3% weaker at apparel stores

Based on the just released FOMC minutes, none of this figured in the Fed's deliberations on when to hike rates next, and when to begin balance sheet normalization.