Yields unchanged despite continued strikes in Iran. Treasury yields initially edged higher today as the US continued strikes on Iran and vessel traffic in the Strait of Hormuz slowed. However, the move ultimately reversed and yields closed nearly flat across the curve, with the 2-year yield at 4.14% and the 10-year yield at 4.55%. Meanwhile, semiconductor stocks dragged equities down, as a strong outlook from Taiwan Semiconductor failed to ease AI valuation concerns, with the NASDAQ and S&P 500 closing 1.47% and 0.51% lower, respectively.
Retail sales rise on lower gas prices. Retail sales rose 0.2% MoM in June, in line with expectations but down from May’s upwardly revised 1.0% gain. Excluding gas stations, retail sales increased 0.7% as gas station spending fell 5.3%, marking the steepest decline since 2022. Seven of 13 categories posted gains, including sporting goods retailers and electronic and appliance stores, suggesting consumers redirected gas savings toward discretionary items. Spending at restaurants and bars, the only retail sales services category, ticked up slightly. Tim Quinlan, senior economist at Wells Fargo, said, “I’m running out of synonyms for resilience,” adding, “if you bet against the US consumer, you’re going to lose.”
Fed’s Logan supports an interest rate hike. Dallas Fed President Lorie Logan made the case for higher rates today, stating, “I currently believe modestly higher interest rates would better balance the outlook and risks.” Despite cooler-than-expected CPI and PPI readings earlier this week, Logan argued that “one month of relief is not enough — it is time to finish the job of restoring price stability.” She also remains uncertain of AI-related productivity, noting that while demand from the technology is already present, the supply-side benefits have yet to materialize. Logan believes this leaves upward price pressure that, in her view, supports the case for a hike.