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S&P 500 inches toward record as weak retail data shifts rate outlook
The index closed Friday 13 points below its record, and expectations for a September Fed rate move have fallen to about 30% to 33% after July retail sales and August consumer sentiment came in softer than forecast.
The S&P 500 is entering a pivotal stretch for earnings and economic data, trading close to its all-time record close after finishing August 14 just 13 points below the 7,798.99 level. In the prior session, the benchmark slipped 0.17% to 7,785.76, with Applied Materials shares falling 5.1% contributing to the decline.
Yahoo Finance reports that the latest U.S. consumer indicators have been a key driver of shifting interest rate expectations. Retail sales unexpectedly declined in July for the first monthly contraction in nine months, and the University of Michigan's August consumer sentiment index fell to 51, below the 54.5 consensus forecast, according to Reuters.
The combination of weaker data and evolving Fed expectations has pushed the market to price a September rate increase of roughly 30% to 33%, down from around 50% earlier in the week. Investors are also weighing ongoing geopolitical risks tied to Iran and the Strait of Hormuz, while Asian markets traded broadly sideways as the U.S. dollar weakened.
With major retailer earnings on deck, the focus is likely to be on commentary about demand from lower-income consumers and the effect of higher gasoline prices. Walmart and Home Depot report Wednesday, August 19, followed by Target, Lowe's, and TJX on Thursday, August 20, as investors look for signs of whether consumer weakness is intensifying.
Yahoo Finance adds that the Fed remains central to the narrative on Wednesday, when the Federal Open Market Committee releases minutes from its latest meeting. The week also includes attention on which companies can provide guidance as the S&P 500 consumer-sensitive backdrop stays in flux.
Latest closeGasoline (RBOB) $2.901 ▼7.3%|S&P 500 7,785.76 ▼0.2%