New York Stock Market Pauses, Awaiting May Retail Sales and Fed Officials' Remarks

May Retail Sales Expected to Rise 0.3% MoM
Fed Officials' Remarks Hinting at Interest Rate Path Also in Focus

The three major indices of the U.S. New York stock market are showing a downward trend in the early session on the 17th (local time) after hovering around the flat line. Investors appear to be taking a 'breather' ahead of the May retail sales data and remarks from Federal Reserve (Fed) officials.

As of 9:45 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average was down 0.26% from the previous close, standing at 38,490.32. The S&P 500, which is centered on large-cap stocks, fell 0.08% to 5,426.99, while the tech-heavy Nasdaq index was down 0.05% at 17,679.84.

By individual stocks, Amazon is down 0.87%. Alphabet, Google's parent company, and Meta, Facebook's parent company, are down 0.81% and 1%, respectively. Nvidia is up 0.51%.

U.S. construction company Toll Brothers is up 0.13%. Large U.S. investment bank Goldman Sachs has upgraded its investment rating from 'sell' to 'neutral,' attracting buying interest. Electronics retailer Best Buy is up 1.36% after UBS raised its investment rating from 'neutral' to 'buy.' Software maker Autodesk jumped 4.5% on news that activist fund Starboard Value acquired $500 million worth of shares.

This week, investors' attention is focused on the May retail sales data. Retail sales last month are expected to have increased by 0.3% compared to the previous month. April retail sales were flat compared to the prior month. If retail sales also fall short of expectations amid easing U.S. consumer price index (CPI) and producer price index (PPI) increases last month, it will strengthen the analysis that the U.S. economy is slowing down. Retail sales are considered a barometer of the economy as they account for two-thirds of the U.S. economy.

Remarks from Fed officials are also anticipated. On this day, speeches are scheduled from John Williams, President of the New York Federal Reserve Bank; Patrick Harker, President of the Philadelphia Fed; and Director Lisa Cook. Last week, the Fed kept the benchmark interest rate steady at 5.25-5.5% at the Federal Open Market Committee (FOMC) meeting, while revising down the expected number of rate cuts this year from three to one through the dot plot. With recent inflation indicators showing signs of easing, attention is on whether there will be a shift in views in the upcoming Fed officials' remarks this week.

Despite the Fed signaling one rate cut this year, the market expects two cuts. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently prices in about a 64% chance that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting. The probability of a 0.25 percentage point or more cut in November exceeds 77%.

The manufacturing index for New York State in the U.S. East, released on this day, continued to show contraction. According to the New York Fed, the Empire State Manufacturing Index for June recorded -6. Although this is an improvement from the market expectation (-12.5) and the previous month (-15.6), it remains below zero, indicating a contractionary phase in the economy.

Government bond yields are rising. The U.S. 2-year Treasury yield, sensitive to monetary policy, rose 5 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.74%, while the U.S. 10-year Treasury yield, a global benchmark for bond yields, increased 6 basis points to around 4.27%.

International oil prices are rising. West Texas Intermediate (WTI) crude oil rose $0.64 (0.82%) from the previous trading day to $78.69 per barrel, and Brent crude, the global benchmark, increased $0.61 (0.74%) to $83.23 per barrel.