Daily Market Color

Equities Rise With Oil, Treasury Prices Fall Off the Back of Positive Consumer Data Before Fed

Stocks rallied while Treasuries sold off across the curve after a mixed bag of US economic data.  Markets appeared to focus on the retail sales report in particular, which increased for a second straight month despite recent weakness in financial markets.  The 0.2% increase in August missed the 0.3% gain forecast by economists, but it followed an upwardly revised 0.7% jump in July.  10 of the major 13 categories of retailers experienced gains, led by auto dealers, restaurants, and clothing stores.  Data last week showed recent stock market volatility has weighed on consumer confidence, but the retail sales data indicates that households continue to spend with support from lower energy prices and a tightening labor market.  Other data released today showed that US manufacturing continues to struggle, contracting by the most since January 2014, and factory activity in New York fell in September for the second straight month.

Aside from the reaction to the data, volumes are still muted as many investors remain cautious leading up to Thursday’s FOMC policy announcement.  Market pundits are claiming this week’s FOMC to be one of the most important Fed meetings in years because the policy decision could have large ramifications globally given the current economic landscape.  Recent volatility in financial markets has dampened expectations for a rate hike, but the Fed could use its updated “dot plot” projections and Yellen’s press conference to make a statement.  A Bloomberg article released today predicted the September dot plot to reveal a much more dovish path of future rate hikes as a way of easing policy before the Fed ultimately begins lift off in October.

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