U.S. Retail Sales Stagnate in June, Fuel Speculation of Fed Rate Cut

U.S. retail sales remained unchanged in June 2024 compared to the previous month, showing zero growth as indicated by preliminary estimates released on Tuesday. This flat reading followed a 0.3% growth in May, in line with the expected forecasted outcome. The stagnant retail sales data has led traders to fully expect an interest rate cut by the Federal Reserve in September.

The Fed futures market is indicating a 100% likelihood of a rate cut in September, with traders assigning an 88% probability to a 25-basis-point rate reduction and a 12% probability to a larger 50-basis-point rate cut. Federal Reserve Chair Jerome Powell’s comments on Monday hinted at a potential interest rate cut, citing progress towards the 2% inflation target and concerns over a weakening U.S. labor market as possible factors driving the decision.

Following the release of the retail sales data, the U.S. dollar strengthened, and Treasury yields saw a slight decline. The Invesco DB USD Index Bullish Fund ETF, tracking the U.S. Dollar Index, rose by 0.2%. Meanwhile, 30-year Treasury yields were down by 3 basis points, with the rate holding steady at 4.44%. Futures on major U.S. stock indexes were trading higher during the premarket session on Tuesday, with S&P 500 contracts up by 0.4% by 8:40 a.m. ET.