US September Retail Sales Surprise Increase... "No Landing Outlook Likely to Gain Momentum"

September Retail Sales Announcement on the 17th
BoA "Expected 0.8% Increase MoM"
If Consumption Strengthens Following Employment, No-Landing Outlook Likely to Spread
Corporate Earnings Announcements Continue

This week, Wall Street's attention is focused on the September retail sales data. Following a surprising increase in employment last month, if retail sales also come out stronger than expected, the 'no-landing' scenario?where the U.S. economy continues its growth without a hard landing?could gain traction. Earnings reports from major companies will also continue.

According to the U.S. Department of Commerce on the 13th (local time), the retail sales data for last month will be released on the 17th. The market expects September retail sales to have increased by 0.3% month-over-month, a larger gain than August's 0.1% increase.

Some on Wall Street speculate that the retail sales data could deliver a 'surprise.' Bank of America (BoA) expects September retail sales to have surged by 0.8% month-over-month.

If retail sales show strength following the higher-than-expected rise in the September Consumer Price Index (CPI) released last week, concerns about inflation could reignite. The previously released September CPI rose 0.2% month-over-month and 2.4% year-over-year, exceeding market forecasts of 0.1% and 2.3%, respectively.

Moreover, with the labor market?closely monitored by monetary authorities?proving more resilient than expected, strong retail sales could fuel expectations that the U.S. economy might achieve a no-landing scenario beyond just a soft landing. According to the September employment report released by the U.S. Department of Labor on the 4th, nonfarm payrolls increased by 254,000, marking the largest gain in six months. This figure significantly exceeded market expectations of 147,000 and August's increase of 159,000.

BoA analysts stated, "Monthly retail sales data can be volatile, but the report will be important if it aligns with our forecast. Just a month ago, the question was whether the economy was heading toward a recession or a soft landing, but if retail sales accelerate considerably, the question may now shift to whether a no-landing scenario is possible."

As the diagnosis of a strong U.S. economy diminishes expectations for a 'big cut' (0.5 percentage point interest rate cut) by the Federal Reserve (Fed), U.S. Treasury yields have risen, with the 10-year yield surpassing the 4% mark last week. Some market participants are even considering the possibility that the Fed might hold rates steady next month. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently prices a 10.5% chance that the Fed will keep rates unchanged at the next Federal Open Market Committee (FOMC) meeting, up from 2.6% a week ago. The probability of a 0.25 percentage point rate cut has fallen from 97.4% to 89.5% over the same period.

This week, the New York Federal Reserve will release data on September consumer inflation expectations, industrial production, manufacturing output, and weekly jobless claims. Public speeches are also scheduled from key Fed officials including Neel Kashkari, President of the Minneapolis Fed; Mary Daly, President of the San Francisco Fed; Fed Board member Adriana Kugler; and Raphael Bostic, President of the Atlanta Fed.

Major companies will release their third-quarter earnings. On the 15th, key financial firms such as BoA, Goldman Sachs, and Citigroup, along with UnitedHealth Group and Johnson & Johnson, will report results. On the 16th, ASML will announce earnings, followed by Taiwan semiconductor company TSMC and Netflix on the 17th. Corporate earnings will serve as a gauge of the U.S. economic situation and are expected to influence the direction of the stock market.