Markets wobble as retail sales rose and unemployment data fell

Dow went up 50, decliners over advancers 3-2 & NAZ edged up 26.  The MLP index was flat in the 287s & the REIT index fell 3+ to the 435s following recent strength.  Junk bond funds barely budged & Treasuries had significant selling which raised yields (more below).  Oil was up chump change but still under 71 despite disappointing Chinese stimulus & gold soared 20 to another record at 2711.

Dow Jones Industrials

Consumer spending held up in Sep, underscoring a resilient economy that is now getting a boost from the Federal Reserve, the Commerce Dept reported.  Retail sales increased a seasonally adjusted 0.4% on the month, up from the unrevised 0.1% gain in Aug & better than the 0.3% forecast.  Excluding autos, sales accelerated 0.5%, better than the forecast for just a 0.1% rise.  The numbers are adjusted for seasonal factors but not inflation, which rose 0.2% on the month as measured by the consumer price index.  In other economic news, initial unemployment claim filings totaled a seasonally adjusted 241K, a decline of 19K & lower than the estimate for 260K, the Labor Dept reported.  Claims fell even following hurricanes Helene & Milton, which tore thru the Southeast in recent weeks exacting tens of Bs of $ in damage.  Filings in both Florida & North Carolina declined after jumping the previous week, according to unadjusted data.  Together, the reports show that consumers, who power about 2/3 of all economic activity in the US, are still spending & the labor market is holding up after signs of weakening thru the summer.  On the retail side, spending grew at miscellaneous store retailers, which showed an increase of 4%, as well as at clothing stores (1.5%) & bars & restaurants (1%).  Those increases offset a 1.6% drop at gas stations as fuel prices fell, along with declines at electronics & appliances stores (-3.3%) & furniture & home furnishing businesses (-1.4%).  Sales increased 1.7% from a year ago, compared with the CPI rate of 2.4% for the same period.

Retail sales rose 0.4% in September, better than expected

Treasury yields advanced after the latest economic data signaled strength in the economy.  The 10-year Treasury yield added 7 basis points to 4.089% & the 2-year Treasury yield climbed 5 basis points to 3.985%.  1 basis point equals 0.01%, & yields & prices move in opposite directions.  Yields took a leg up after consumer spending figures came in hotter than forecast.  The data comes after several Fed officials earlier this week hinted at further rate cuts to come.  Additional comments from policymakers are expected as the week continues.  Elsewhere, the European Central Bank (ECB) implemented its 3rd interest rate cut of the year at its meeting today.  The decision comes as policymakers have pointed towards a weaker growth outlook & easing inflation risks.

Treasury yields jump after better-than-expected retail sales, drop in jobless claims

The ECB cut its key interest rate to 3.25%.  The move at the Oct meeting had been fully priced by markets after policymakers flagged reduced inflation risks and a weakening growth outlook.  Following the decision, the ECB's Governing Council called the process of disinflation “well on track” in its most optimistic statement in the current cycle.  “The inflation outlook is also affected by recent downside surprises in indicators of economic activity,” it said.  Headline price rises in the euro area eased to 1.8% in Sep, coming in below the central bank's 2% target for the first time in 3 years.  The ECB once again forecast that inflation would “rise in the coming months, before declining to target in the course of next year.”  It is the first time the ECB has reduced rates at consecutive meetings since 2011.  The ECB only debated a 25 basis point rate cut, rather than a larger 50 basis point cut, as opted for by the Federal Reserve in Sep, ECB Pres Christine Lagarde said.  “It is a fact that the economic activity has come in — on the basis of the … indicators that are available — a bit lower than we anticipated,” Lagarde added.  Expectations for a faster pace of monetary easing had built since the ECB's Sep 12 meeting, when market pricing suggested just 1 more rate cut this year, rather than the 2 priced in as of today.

ECB cuts rates, Lagarde flags downside risks to inflation outlook

Strong retail sales data reinforced overall strength in the US economy, giving recognition to the argument the economy could be reaccelerating following a surprisingly strong Sep jobs report.  However, investors are cautious as they study the data.  And gold found more fans, who took it to a new record above 2700.