What's going on?

German automaker Daimler veered into the fast lane late last week, flagging a higher-than-expected quarterly profit � and investors racing after the company�s stock sent its price 5% higher on Friday.

What does this mean?

The Mercedes-Benz builder�s preliminary update was light on detail � although given that the US and China represent the company�s largest and third-largest markets, it�s likely that accelerating car sales in both countries contributed to improved revenue. What Daimler did say was that aggressive cost-cutting helped its profit beat investors� projections.


Swedish rival Volvo also had cost-cutting to thank in part for its Friday announcement of better-than-expected third-quarter earnings. As a more diverse business than Daimler, however, its sales were helped by transport levels getting back to near normal in most of its markets. That led to increased orders for Volvo�s trucks, engines, and construction equipment � as well as more demand for its follow-on services.

Why should I care?

The bigger picture: Data in the driving seat.

Auto sales data can be particularly useful for investors since the industry is an �early cyclical� one. That means activity is quick to dry up when economic growth is slowing and people start penny-pinching � and quick to rise when the economy begins to improve (tweet this). With car sales in China now rising for three consecutive months, the US on the road to recovery, and Europe � according to data out on Friday � seeing car sales grow in September for the first time this year, investors will be keeping a close eye on auto stocks.

For markets: Swing low, sweet cyclicals.

Analysts have been expecting economically sensitive cyclical stocks to come back into vogue for a while now � and if auto data won�t do it, perhaps US retail sales might. Friday’s retail figures for last month were�much stronger�than economists�had�predicted, boding well for cyclical consumer discretionary companies� shares.