Retail sales were mixed but on the moderate side in August, as the pivotal two-day Federal Reserve meeting gets underway. After the data, the S&P 500 traded higher, as investors continued to expect a half-point rate cut.
Retail Sales Hits And Misses
Overall retail sales edged up 0.1% in August vs. expectations of a 0.3% decline, according to the Econoday consensus forecast. July's gain was revised up slightly to 1.1%.
Excluding autos, sales rose just 0.1%, below 0.3% predictions.
Factoring out both autos and gas, sales rose 0.2%, missing 0.3% forecasts.
Sales at food services and drinking places were flat in August. That lowered the year-over-year increase to 2.7% from an upwardly revised 3.5% in July.
Sales at nonstore retailers like Amazon rose 1.4% in August and 7.8% from a year ago. Furniture store sales dipped 0.7% in August, but July's gain was revised up to 1.7% from 0.5%, underscoring that the retail sales data is subject to big revisions.
Fed Meeting: Rate-Cut Odds
After the retail sales data, markets continued to price in 67% odds of a half-point rate cut and 33% odds of a quarter-point move, according to CME Group's FedWatch page.
Retail sales data for August won't likely have a big impact on Wednesday's decision, which will be announced at 2 p.m. ET. Retail sales have seen a mix of strong months and soft months, but the 2.7% year-over-year gain through July suggests moderation. Further, goods prices, including used and new vehicle prices have been falling, suggesting no inflation threat from goods consumption.
The Fed is rightly focused on the strength of the labor market, which will determine whether income gains fuel or take the wind out of consumer spending.
Rate Cuts May Start With A Bang; S&P 500 Eyes New High
Leading Retail Stocks
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S&P 500
The S&P 500 rose 0.45% in early Tuesday stock market action, little changed after the retail sales report. That followed Monday's 0.1% rise and last week's 4% advance for the S&P 500, the best performance since Nov. 3, 2023.
The S&P 500 now sits just 0.6% below its all-time closing high on July 16 and up 18.1% for the year.
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