- Retail sales grew 1% during June.
- A 75-point rate hike is expected.
- Citigroup and Pinterest soar higher on the stock market.
U.S. retail sales rebounded strongly in June. The data managed to moderate fears of an impending recession that had been hitting assets. They grew by 1% last month (above the 0.8% expected), while May’s data was revised upward to show that sales eased by 0.1% instead of the 0.3% previously reported.
These data pushed back concerns about an impending recession, while investors have lowered bets around a large 100 basis point rate hike later this month. Sales have risen as people spent more on gasoline and other goods amid worrisome inflation.
Nearly across-the-board gains were led by automobiles, which rebounded 0.8% after falling 3% in May amid shortages. Gasoline sales climbed 3.6%, driven by higher prices. Second quarter GDP estimates range from a 1.7% annualized rate of decline to a 1% growth rate. Moderating expectations of both rising rates and stagnant activity explain the solid start for markets.
This situation has been reflected in the main Wall Street indexes, which have risen after a five-day downward streak. Statements made today by Atlanta Fed President Raphael Bostic dismissed the possibility of a sharp 100-point hike “It could undermine the positive trends still seen in the economy and add to the uncertainty prevailing during these days.” the Fed official maintained.
Disparate financial results at banks
Citigroup has rallied 13% after reporting a smaller-than-expected 27% drop in quarterly earnings. Its performance was underpinned by its treasury services business and its money desks benefited from market volatility. Wells Fargo also reported good results, gaining 5.9% by setting aside money to cover credit losses. On the other hand, results were not good for Morgan Stanley and JPMorgan Chase & Co who published disappointing numbers and warned about the risks of the economic future.
Other important quarterly results are expected next week from Netflix, Tesla and Goldman Sachs among others. Elliott Management fund reported that it acquired 9% of social network Pinterest (PINS). The stock of the popular image social network has risen more than 15%.
