Retail sales for October came in slightly above expectations early Friday, amid fresh doubts about future Fed rate cuts following generally in-line inflation reports and Federal Reserve Chairman Jerome Powell saying policymakers are in "no hurry" to cut interest rates. The S&P 500 fell sharply, extending weekly losses.
Retail Sales Report
The Commerce Department released the October retail sales report at 8:30 a.m. ET.
Overall retail sales rose 0.4% vs. September. Economists expect a 0.3% gain. Further, September sales growth was revised up to 0.8%, double the initial reading.
But sales excluding food and gasoline climbed just 0.1% vs. consensus for a 0.4% advance. However, September sales were revised up to a 1.2% gain from 0.7%.
Next week, Walmart, Target and TJX Cos. headline a big week for retail earnings.
Those reports also will give a sense of how the holiday shopping season is taking shape.
Manufacturing Data
Also at 8:30 a.m. ET, the New York Federal Reserve released its Empire State manufacturing index for November. That surged to a positive reading of 31.2 from October's -11.7. It was expected to rebound to break-even.
At 9:15 a.m. ET, the Federal Reserve's October industrial production report was released. Output fell 0.3% after September's revised 0.5% decline. Manufacturing production slumped 0.5% after October's 0.3% drop.
Inflation Data
Earlier this week, the Labor Department released the October consumer price index and producer price index.
The consumer price index largely came in line across the board on Wednesday. The overall CPI rose 0.2% vs. September, matching the Econoday consensus. The 12-month CPI inflation rate picked up to 2.6% from 2.4%, as expected.
Core CPI, which strips out volatile food and energy prices, rose 0.3% vs. September, with the 12-month core CPI inflation rate holding at 3.3%, both as expected.
Core inflation has been stuck since falling to 3.2% in July. It peaked at a 40-year-high 6.6% in September 2022.
The producer price index showed a 0.2% gain vs. September, meeting forecasts. PPI inflation was 2.2% vs. a year earlier, up from September's 1.9% but just below consensus. Core PPI climbed 0.3% on the month, as expected. The 12-month core PPI inflation rate ticked up to 2.2%.
Powell Comments, Fed Rate Cut Odds
On Thursday afternoon, Fed chief Jerome Powell said in a Dallas speech, "The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully."
Based on the CPI and PPI data, Powell said that the Fed's primary inflation gauge, the core PCE price index, will likely show a slight uptick in the inflation rate to 2.8% in October from 2.65% in September. By comparison, Fed projections in September showed core PCE inflation running at 2.6% in Q4.
The Fed cut rates aggressively in September, by 50 basis points, amid signs of a weakening job market. A quarter-point cut followed last week.
Since the September rate cut, economic data has firmed as inflation's descent has stalled, with the retail sales data bolstering that. Meanwhile, Donald Trump's election with a GOP Congress raise the potential for more aggressive tax cuts and larger deficits. Powell said on Nov. 7 that the Fed won't consider Trump's policies until they take shape, but it's a factor to consider.
Consensus is 58.7% that there will be a quarter-point Fed rate cut in December, essentially unchanged from just before the retail sales report. That's down from 72.2% on Thursday and above 80% on Wednesday.
S&P 500
S&P 500 fell 1.1% Friday morning. The benchmark S&P 500 index is down 1.8% this week after surging 4.7% last week to a record high, fueled by Trump's election.
The 10-year Treasury yield climbed to 4.47% from the prior session's 4.43%. The yield is trading at four-month highs.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
