(Bloomberg) — Stocks hit all-time highs after retail sales suggested the main driver of the economy is still holding steady as inflation eases and the Federal Reserve moves closer to starting to cut rates.
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All major equity benchmarks rose, with the S&P 500 heading for its 38th record high this year. Traders also went through financial gains. Bank of America Corp. rose after it said net interest income would rise by the end of the year. Morgan Stanley fell after results from its core wealth business missed estimates. 10-year Treasury yields fell after the economic report.
“To see a strong retail sales print is healthy — even if it causes some short-term volatility on the prospect of a rate cut,” said Bret Kenwell at eToro. “It is much better to see the Fed eventually lower rates to reduce inflation than to see the Fed cut rates to shore up a weakened economy.”
The S&P 500 rose 0.3%. The Russell 2000 of small caps gained 2%. Amazon.com Inc. kicks off its Prime Day event, which is expected to show strong growth.
For Ian Lyngen at BMO Capital Markets, it was a round of “bond cuts” in the retail sales data, but “there is nothing in the release that would change expectations for a September Fed cut.”
“June retail spending was expected to confirm signs of an economic slowdown, but instead it has given new life to the argument that Fed officials need not yet worry about a slow real economy,” said Mark Streiber. at FHN Financial.
U.S. retail sales, excluding the impact of a cyber attack on auto dealers, rose in June by the most in three months, a sign that consumers regained their footing at the end of the second quarter. Total retail sales were unchanged, limited by a 2% decline in receipts at auto dealers. The figures are not adjusted for inflation.
“This report does not negate expectations that the Fed will cut rates at the September meeting, unless inflation-related data releases show a rise in prices,” said Quincy Krosby at LPL Financial.
Fed Chairman Jerome Powell said on Monday that second-quarter economic data had given policymakers more confidence that inflation was moving toward the central bank’s 2% target, possibly paving the way for near-term rate cuts. of interest.
Stock market resilience – thanks to improving corporate earnings and frenzied demand for AI-related companies – has been supported by optimism that the economy has weathered the worst of the Fed’s policy tightening after higher interest rates in more than two decades.
The S&P 500 is heading for its longest stretch without a 2% decline since the start of the global financial crisis in 2007.
Corporate highlights:
Charles Schwab Corp. reported that fewer clients opened new brokerage accounts with the investment giant than analysts expected, sending the company’s stock lower in early trading.
PNC Financial Services Group Inc. marked its first increase in net interest income since the end of 2022, setting itself up for what it expects to be a record year of NII growth in 2025.
Microsoft Corp.’s investment. Inflection AI will face a full antitrust investigation in the UK after the watchdog said it needed to take a closer look at the AI startup’s hiring of former employees.
Philip Morris International Inc. is expanding production of Zyn in the US as the popular oral nicotine pouch becomes increasingly difficult to find due to increased demand.
Starboard Value became the third activist investor this year to take a stake in Match Group Inc., the owner of the dating app Tinder, whose paying customer base has shrunk for six straight quarters.
Deutsche Bank AG is encouraging its investment bankers to be more selective in offering mergers and acquisitions mandates and focus on more profitable deals, people with knowledge of the matter said, following a recent hiring spree at the firm.
Hugo Boss lowered its profit guidance for the year, citing weakness in key markets such as China and the UK.
This week’s highlights:
Eurozone CPI, Wednesday
US housing starts, industrial production on Wednesday
Fed Beige Book, Wednesday
Fed Thomas Barkin of the Fed on Wednesday
ECB rate decision on Thursday
Initial US Jobless Claims, Philadelphia Fed Production, LEI Conference Board, Thursday
The Fed’s Mary Daly, Lorie Logan and Michelle Bowman speak Thursday
Fed John Williams, Raphael Bostic speak on Friday
Some of the main movements in the markets:
INVENTORY
The S&P 500 was up 0.3% as of 9:57 a.m. New York time
The Nasdaq 100 was little changed
Dow Jones Industrial Average rose 1%
Stoxx Europe 600 fell 0.5%
The MSCI World Index was little changed
Russell 2000 index rose 1.9%
currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.1% to $1.0881
The British pound fell 0.1% to $1.2954
The Japanese yen fell 0.4% to 158.64 per dollar
Cryptocurrencies
Bitcoin was little changed at $63,761.25
Ether fell 0.8% to $3,408.12
BONDS
The 10-year Treasury yield fell two basis points to 4.21%
Germany’s 10-year yield fell three basis points to 2.44%
Britain’s 10-year yield fell three basis points to 4.07%
wares
West Texas Intermediate crude fell 1.5% to $80.66 a barrel
Spot gold rose 0.8% to $2,442.18 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Jessica Menton.
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