Young customers buy second-hand luxury goods at a shopping mall in Shanghai, China, October 10, 2023.
CFOTO | Future Publishing | Getty Images
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U.S. markets wavered Tuesday as investors digested September’s U.S. retail sales report and third-quarter earnings from banks.
Consumers spent much more last month than economist had expected, which “puts us on track for a strong GDP number later this month,” said David Russell of TradeStation, an online trading and brokerage firm. Following the retail report, Goldman Sachs boosted its forecast for third-quarter gross domestic product by 0.3 percentage points to 4%. That’d be the highest quarterly growth since the last quarter of 2021.
It’s not just U.S. consumers who are splurging. Retail sales in China also jumped more than expected in September, buoying the country’s third-quarter GDP growth. China’s economy might finally be stabilizing, giving it a foundation on which to meet — or even exceed — Beijing’s target of about 5% economic growth this year. A resurgent China will boost global economic growth, but might raise new fears about inflation on renewed demand from the country.
Indeed, the specter of high inflation and, correspondingly, higher-for-longer interest rates, haunted the retail report, at least for the U.S. The hot spending data “gives the Fed zero reason to loosen policy, which keeps the 10-year Treasury yield pushing toward 5%,” said Russell.
Treasury yields jumped yesterday to multiyear highs, pressurizing stocks despite a good start to earnings season. (Of the companies that have reported so far, 83% have surpassed earnings estimates.)
Major U.S. indexes made hesitant moves in both directions. The S&P 500 slipped a miniscule 0.01%, the Nasdaq Composite lost 0.25% while the Dow Jones Industrial Average eked out the merest gain of 0.04%.
If bond yields continue rising, it’s possible earnings reports might not have a big effect on the overall stock market. As Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, put it, “It’s more the bond market driving the stock market at this point.”
