Stock Futures Rise as Retail Sales Exceed Expectations, Fed Meeting Begins

US retail sales rose 0.6% in August, beating expectations. Stock futures gained as the Fed's two-day meeting began, with a 96% chance of a 0.25% interest rate cut. Oracle shares surged 4% on a potential TikTok deal. Tesla shares rose 1.5% after CEO Elon Musk bought $1 billion of stock. Alphabet shares were slightly higher after its market capitalization surpassed $3 trillion.

US retail sales rose 0.6% in August, outperforming expectations and signaling a resilient consumer spending despite rising inflation and economic uncertainty. The National Retail Federation (NRF) and CNBC’s Retail Monitor both reported gains for the month, with back-to-school shopping and pre-tariff deal hunting driving the increase US Retail Sales Show Strength But Inflation Is Heating Up^[1].

However, core retail sales, excluding restaurants, autos, and fuel, rose by just 0.3% in August, a significant slowdown from July’s 1.6% growth. This suggests that while consumers are still spending, the momentum is waning. Fresh research indicates that early inflation effects are hitting commodity goods, while official data shows the fastest jump in consumer inflation in seven months, with core inflation still above 3% US Retail Sales Show Strength But Inflation Is Heating Up^[1].

The University of Michigan surveys suggest that consumer sentiment has dropped to its lowest level since May, indicating that shoppers are feeling the pinch. This could hint at limits to consumer resilience if tariffs and inflation push prices further, potentially slowing the economy US Retail Sales Show Strength But Inflation Is Heating Up^[1].

Investors are treading carefully, with markets betting on a Federal Reserve rate cut this week. The CME FedWatch Tool shows a 100% probability of a 0.25% cut, with most expectations pointing to a cautious approach to balance cooling employment and persistent inflation Fed Interest Rate Predictions This Week: 25 Basis Point Cut Widely Expected^[2].

Stock futures gained as the Fed's two-day meeting began, reflecting the anticipation of a rate cut. Oracle shares surged 4% on a potential TikTok deal, while Tesla shares rose 1.5% after CEO Elon Musk bought $1 billion of stock. Alphabet shares were slightly higher after its market capitalization surpassed $3 trillion US Retail Sales Show Strength But Inflation Is Heating Up^[1].

A 25 basis point cut is widely expected, with most economists predicting at least one more cut before the end of 2025. The Fed aims to support the job market while keeping an eye on inflation, aiming for a "soft landing" to control inflation without causing a recession Fed Interest Rate Predictions This Week: 25 Basis Point Cut Widely Expected^[2].