Mid-Week Market Minute 1.17.24

Retail Sales Data Beats Expectations; Rates Cuts Outlook

Global stocks declined in the holiday-shortened trading week as investors digested a fresh slate of economic data alongside corporate earnings results. Interest rates, a significant factor, remained at the forefront and acted as a headwind for asset prices in the first half of January. The yield on the 10-year Treasury note, which began the year around 3.86%, traded as high as 4.10% this week.

Federal Reserve Governor Christopher Waller's comments on Tuesday suggested rate cuts are likely in 2024 but may not occur as quickly as markets hoped. Separately, concerns about potential supply-chain disruptions due to tensions in the Red Sea added further uncertainty to the global inflationary outlook. Futures markets now indicate a 60% chance the Fed will cut rates at their March 20 meeting, down from a 75% probability at the beginning of the week.

On the data front, retail sales for December surpassed expectations, rising 0.6% against the anticipated 0.4% gain. Industrial production also exceeded consensus, increasing by 0.1% for the month, contrary to expectations of a 0.1% decline. 

Looking ahead, fourth-quarter earnings gain momentum this week and serve as the next test for the markets. Despite a relatively lackluster start to earnings season, analysts still expect mid-single-digit earnings growth in the fourth quarter.

Source: GSAM, CNBC, JPMorgan

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