US Retail Sales Surge in July, Easing Economic Slowdown Fears | Market Update
In a surprising turn of events, US retail sales have exceeded expectations for the month of July, providing a much-needed boost to financial markets. This positive data comes on the heels of concerns about a potential economic downturn, highlighted by a recent spike in the unemployment rate.
Additionally, a report indicating a smaller-than-expected rise in unemployment benefit claims further reinforced the resilience of the labor market. This news has led to an increase in stock futures, Treasury yields, and the dollar.
As a result, futures traders have adjusted their expectations for the Federal Reserve's upcoming actions, with the likelihood of a 25 basis point rate cut in September now standing at around 75%. The Commerce Department reported a 1.0% increase in retail sales for July, following a revised 0.2% decline in June. This outperformed economists' forecasts of a 0.3% rise.
Market Reaction:
- Stocks: E-minis have surged by 0.94%
- Bonds: Yields on 10-year and two-year US Treasury notes have risen
- Forex: The dollar has strengthened by 0.51%
Expert Analysis:
According to Steve Wyett, Chief Investment Strategist at Bok Financial, the latest data suggests that fears of an imminent recession may be unfounded. He believes that a 25 basis point rate cut in September is still likely, given easing inflation and positive economic reports.
Chris Larkin, Managing Director of Trading and Investing at E*Trade, echoed this sentiment, stating that the recent data could alleviate concerns about a recession and reduce pressure on the Fed to make aggressive rate cuts.
In a similar vein, Bret Kenwell, a US Investment Analyst at eToro, highlighted the positive aspects of the retail sales report and lower-than-expected jobless claims data. He emphasized that good news in the economy is now being perceived positively by investors, which could delay the need for further rate cuts until the September meeting.
In conclusion, the latest economic data paints a more optimistic picture of the US economy, potentially averting a downturn. Investors should pay attention to upcoming employment data and Fed meetings for further insights into the market's trajectory.