September Retail Sales Up 0.4% MoM, Exceeding Expectations
Unemployment Claims Decrease by 19,000 from Previous Week
Rate-Hike Pause Gains Support Amid Continued US Economic Growth Outlook
U.S. Treasury yields are rising, supported by robust consumer spending. Expectations that the Federal Reserve (Fed) may slow down the pace of interest rate cuts due to continued U.S. economic growth have pushed Treasury yields higher. Some market participants are also increasingly anticipating that the Fed may hold rates steady next month.
According to the bond market as of 4:57 p.m. Eastern Time on the 17th (local time), the 10-year U.S. Treasury yield, a global benchmark for bond yields, is trading at around 4.09%, up 7 basis points (1bp = 0.01 percentage points) from the previous trading day. The 2-year Treasury yield, which is sensitive to monetary policy, is at approximately 3.97%, up 4 basis points from the previous day.
Last month's retail sales data pushed U.S. Treasury yields higher. Strong retail sales, a key pillar accounting for two-thirds of the U.S. economy, confirmed that the economy is more resilient than expected, dampening hopes for rate cuts.
According to the U.S. Department of Commerce on the day, September retail sales totaled $714.4 billion, up 0.4% from the previous month. The market had initially expected retail sales to increase by 0.3% based on Dow Jones estimates, so the actual figure exceeded expectations. In August, retail sales rose by 0.1%. Retail sales excluding automobiles and gasoline increased by 0.7%, significantly surpassing both expert forecasts (0.3%) and August's figure (0.3%).
Out of 13 retail sales categories, 10 showed growth. Consumer spending increased at variety stores (4%), clothing and accessories stores (1.5%), health and personal care outlets (1.1%), grocery stores (1%), and restaurants and bars (1%). Conversely, sales declined at electronics stores (-3.3%), gas stations (-1.6%), and furniture stores (-1.4%).
Matthew Weller, Chief of Global Research at Forex.com and City Index, said, "The likelihood that the Fed will pause rate cuts in November is low, but economic reports released by then are expected to show a stronger-than-anticipated U.S. economy. Regardless of the Fed’s decision next month, the 2025 rate outlook is higher than it has been in recent weeks."
The market is slightly increasing the probability that the Fed will hold rates steady at the Federal Open Market Committee (FOMC) meeting next month. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market raised the probability of a rate hold in November from 6.3% the previous day to 11.7% on the day. The chance of a 0.25 percentage point rate cut fell from 93.7% to 88.3% during the same period. While the 'small cut' (0.25 percentage point rate reduction) outlook remains overwhelmingly dominant, expectations for a rate hold are gradually gaining traction.
The unemployment claims data released on the day also eased concerns about a cooling labor market. According to the U.S. Department of Labor, initial jobless claims last week fell by 19,000 to 241,000 (October 6?12), matching market expectations. Continuing claims, which count those claiming unemployment benefits for at least two weeks, totaled 1,867,000 for the week of September 29 to October 5. This exceeded the previous week's revised figure (1,858,000) but was below market forecasts (1,870,000).
David Russell, Global Market Strategist at TradeStation, analyzed, "Thanks to American consumers, the economy continues to accelerate, and with lower fuel prices, the improvement effect will be even greater. Today's data shows that the likelihood of a recession has decreased." He added, "Santa might come to the stock market this year. In fact, he might already be here."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
