- Weak retail sales data on Tuesday leads to lower bond yields
- Month-on-month sales increased 0.1%, below expectations.
- Stocks rose as investors assessed how the data could impact rate cut expectations.
U.S. stocks edged higher on Tuesday after weaker-than-expected retail sales data for May led to a decline in Treasury yields.
The S&P 500 and Nasdaq are continuing to post record gains as investors focus on how weakening consumer strength could impact the outlook for interest rate cuts.
U.S. consumers appeared to cut back on spending last month, with sales rising 0.1% in May from the previous month, below expectations, and prior months also being revised down. Sales were up 2.3% from a year earlier.
Investors have been sensitive to signs of economic weakness this year, and markets will be eager to see how this affects the Federal Reserve’s monetary policy plans.
In response, government bond yields fell about 3 basis points to 4.25%.
“Treasury yields fell after the highly anticipated retail sales report came in below expectations, but downward revisions over the past two months have analysts concerned that low- and middle-income wage earners are facing both inflationary and inflationary pressures,” Quincy Krosby, chief global strategist at LPL Financial, said Tuesday morning.
“If employment data, particularly initial jobless claims, continue to point to a more pronounced softening in the labor market, the Fed may need to recalibrate its timeline for beginning to ease policy, as Chairman Powell has suggested.”
So far, most investors continue to expect the first rate cut to come in September, according to the CME FedWatch tool, although recent comments from the Fed have pointed to the December policy meeting as the timing for that first cut.
Below are U.S. stock indexes as of the start of trading at 9:30 a.m. on Tuesday.
Here’s something else that happened today:
Commodities, Bonds and Cryptocurrencies:
- Crude oil futures rose. West Texas Intermediate crude rose 0.25% to $80.50 a barrel. The international benchmark Brent crude rose 0.2% to $84.46 a barrel.
- Gold rose slightly to $2,336 an ounce.
- The yield on the 10-year Treasury note fell 3 basis points to 4.25%.
- Bitcoin fell 1% to $64,648.
