Retail sales rose more than expected in September, while new claims for jobless benefits fell unexpectedly fell, though it may only be a temporary reprieve. After the data, the S&P 500 hit an intraday record, helped by a strong earnings report from Taiwan Semiconductor, but stocks faded amid a jump in Treasury yields.
Despite more evidence of a solid consumer-spending backdrop, Wall Street sees a quarter-point Federal Reserve rate cut next month as all but certain. However, a stronger-than-expected retail sales report added a bit of doubt about rate-cut prospects at the year's final Fed meeting in December.
Retail Sales Hits And Misses
Overall retail sales rose 0.4% in September, topping expectations of a 0.3% rise, according to the Econoday consensus forecast. August's gain was unrevised at 0.1%.
Excluding autos, sales climbed 0.5%, above 0.1% predictions. Factoring out both autos and gas, sales rose 0.7%, ahead of 0.3% forecasts. August's gain was revised up slightly to 0.3%.
Gas station sales fell 1.6%. Other weak spots included furniture store sales (-1.4%) and electronics and appliance stores (-3.3%).
Other categories of stores saw rising sales, led by miscellaneous (+4%), clothing (+1.5%), health and personal care (+1.1%).
In Q3, overall retail sales rose 2.3% from a year ago. Excluding autos and gas, Q3 sales rose a solid 3.5% from a year ago. Given the recent trend in lower goods prices, consumers are contributing to solid economic growth on an inflation-adjusted basis.
Initial Jobless Claims
New claims for unemployment benefits unexpectedly fell 19,000 to 241,000 in the week through Oct. 12, despite the hit from Hurricane Milton. That likely reflects a delay in people filing for benefits, so claims could spike next week. Wall Street had expected 260,000 new claims, up 2,000 from the prior week's initially reported figure. Initial claims in Florida fell by 3,428.
The number of people continuing to claim benefits in the week through Oct. 5 rose 9,000 to 1.867 million, just below a three-year high.
Along with hurricanes Helene and Miton, the Boeing strike also has contributed to the recent rise in claims.
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Industrial Production
The Federal Reserve reported a 0.3% dip in industrial production for September, including a 0.4% decline in manufacturing output, trailing forecasts of -0.1% for both gauges.
Further, the initially reported 0.8% rise in industrial production in August was revised to +0.3%, while factory output rose a revised 0.5%, down from 0.9%.
Boeing's strike was behind the manufacturing slump, Pantheon Macroeconomics said in a note.
Fed Meeting: Rate-Cut Odds
After retail sales, jobless claims and industrial production data, markets are pricing in 89% odds of a quarter-point Fed rate cut at the Nov. 7 meeting, down from 94% on Wednesday, according to CME Group's FedWatch page.
Odds of another 25-basis-point move on at the Dec. 18 Fed meeting stand at 77%, down from 86%.
The Fed has said that future rate cuts will be dependent on economic data, but the impact of hurricanes and the Boeing strike will make that data hard to assess through at least the October jobs report released early next month.
Leading Retail Stocks
Among retail-related names, DoorDash, SharkNinja and Freshpet are part of the IBD Leaderboard portfolio of elite stocks, as is Mercadolibre, known as the Amazon of Latin America. Cava Group, Shopify and Wingstop are on the Leaderboard watch list.
The flagship IBD 50 list of leading growth stocks includes Abercrombie & Fitch, Freshpet and On Holding.
SwingTrader has open positions in Walmart and CAVA.
S&P 500
The S&P 500 faded to a 0.1% gain in Thursday afternoon stock market action, paring a 0.6% advance amid a rise in Treasury yields. That followed Wednesday's 0.5% rise, which carried the S&P 500 to within 0.3% of Monday's all-time closing high.
Through Wednesday, the S&P 500 has climbed 22.5% for the year.
The 10-year Treasury yield perked up 7 basis points to 4.09%, after slipping as low as 4% on Wednesday.
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