Stocks Futures Edge Higher as June Retail Sales Beat Forecast, Boosting September Rate-Cut Likelihood

The latest better-than-expected June retail data provides a snapshot of the current solid state of the economy. Retail sales figures remained unchanged year-over-year, a stronger performance than the anticipated -0.3% decline, although it did show a slight deceleration from the previous month's 0.1% growth. This stability underscores the resilience of consumer spending even amidst slowing inflation, making the Federal Reserve more comfortable with its rate-cut timeline.

Excluding auto and gas, June sales increased by 0.8%, above the expected 0.2% increase. The largest decline came from gasoline stations, where sales slipped by 3%.

Following the release of this data, futures for the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 all experienced gains. The Dow Jones, in particular, saw an increase of 0.3%, driven by strong performances in industry sectors. This positive market response underscores investor optimism about the economic outlook.

Additionally, the recently released Consumer Price Index (CPI) for June came in at 3% year-over-year, slightly below the expected 3.1%. This lower-than-expected inflation rate is a welcome development, suggesting that inflationary pressures may be easing, and enhancing the likelihood of a soft landing.

The market's confidence in a rate cut in September has also increased. With almost a 93% probability of a 25 basis points cut, this confidence is bolstered by the steady June sales data and the lower CPI. The anticipation of this rate cut reflects the broader sentiment that the economy is navigating through inflationary pressures effectively, without tipping into a recession.

In addition, Bank of America and Morgan Stanley posted Q2 results before the opening bell, both showing strong recovery in investment banking. This also indicates that rate-sensitive sectors are coping well with the current high rates.