Second Straight Monthly Gain in Retail Sales Shows Consumer Resilience

Yields higher after retail sales advances. UST yields initially had a mixed reaction to July retail sales data, first rising ~2 bps before reversing course. Yields gradually climbed for the remainder of the session, and the 2-year yield closed 2 bps higher at 3.75% while 10-year and 30-year yields rose 3-5 bps to 4.32% and 4.92%, respectively. The yield curve steepened this week, as the 2-year fell by 2 bps and the 10-year gained 3 bps. Meanwhile, equities broadly fell on declining consumer sentiment, which came in at 58.6 versus 61.7 previously.

Retail sales highlight consumer resilience. Headline retail sales came in today at 0.5%, missing estimates of 0.6%, but marking a second straight monthly gain. Nine of the 13 retail categories advanced MoM, with notable increases coming from car sales and online retail promotions. July’s numbers, combined with strong upward revisions from June (0.9%), illustrate resilient consumer spending in recent months, easing some concerns about broader economic health. Fed Funds futures now have a September rate cut priced in as 85% likely versus over 100% on Wednesday, largely due to today’s data and yesterday’s hot PPI print.

Trump – Putin summit kicks off in Alaska. President Trump and Russian President Putin met this afternoon to discuss the ongoing war in Ukraine, with Ukrainian President Zelenskyy notably absent. While the White House has announced it aims to broker a cease-fire agreement, the specific terms of negotiation are unclear. Economic ties between the US and Russia have largely been severed over the conflict, and President Trump indicated they could not be renewed “until we get the war settled.” The outcome of the summit holds economic implications for other countries as well, namely India and China, who are facing or threatened with additional tariffs for their continued purchases of Russian oil. If a cease-fire were reached, India’s 50% tariff rate could be walked back to 25%.