Stocks are on the rise today, buoyed by positive developments in US retail sales. The S&P 500 Index ($SPX) (SPY) has gained +0.43%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.29%, and the Nasdaq 100 Index ($IUXX) (QQQ) has increased by +0.65%. This upward trend is underpinned by encouraging economic reports that suggest a soft landing for the economy.

Positive corporate performance is a key driver of today’s gains. Intel (NASDAQ:INTC) has surged more than +2% after securing new business from Amazon.com (NASDAQ:AMZN) for its chip manufacturing division. Microsoft (NASDAQ:MSFT) also rose over +1%, thanks to a 10% increase in its quarterly dividend and the announcement of a substantial $60 billion stock repurchase program. These developments contribute to the optimistic outlook surrounding the US retail sales figures released today.

In August, retail sales unexpectedly rose by +0.1% month-over-month, contrasting sharply with forecasts predicting a decline of -0.2%. The data excluding autos also recorded a modest increase of +0.1%, slightly below the anticipated +0.2%. Furthermore, manufacturing production in the US increased by +0.9% month-over-month in August, significantly outperforming the expected rise of +0.2%. This marks the most substantial increase in six months and supports the notion that the economy may be more resilient than previously thought.

As investors digest these figures, all eyes will be on the upcoming two-day Federal Open Market Committee (FOMC) meeting. Market expectations are heavily leaning toward a -25 basis point rate cut, with a 100% probability assigned to this outcome. However, there’s also a notable 69% chance of a more aggressive -50 basis point cut. Comments from Fed Chair Jerome Powell following the meeting will be critical in determining the Fed’s future policy stance, especially given the current economic climate.

International markets displayed mixed results today. The Euro Stoxx 50 has climbed to a one-and-a-half-week high, up +0.85%. Meanwhile, China’s Shanghai Composite was closed for the Mid-Autumn Festival, and Japan’s Nikkei Stock 225 experienced a drop of -1.03%.

Interest Rates and Bonds

In the bond market, December 10-year Treasury notes (ZNZ24) fell by -5 ticks, while the yield on the 10-year T-note rose by +1.7 basis points to 3.634%. The rise in yields followed the stronger-than-expected retail sales and manufacturing reports, which have diminished safe-haven demand for T-notes. Speculation about a potential -50 basis point cut in interest rates also influenced movements in the bond market.

European government bond yields displayed a mixed performance, with the 10-year German bund yield increasing by +0.5 basis points to 2.127%. In contrast, the 10-year UK gilt yield rebounded from a recent low, rising by +0.3 basis points to 3.761%.

What’s Driving US Stocks

On the corporate front, several stocks are making headlines. Intel continues to lead gainers in the Dow Jones Industrials, fueled by its deal with Amazon.com. HP Enterprise (NYSE:HPE) rose by more than +4% following an upgrade from Bank of America Global Research, which raised its price target to $24. General Electric’s (NYSE:GE) subsidiary, GE Vernova (NYSE:GEV), is also up over +3% due to a similar upgrade.

Dell Technologies (NYSE:DELL) has seen a more than +2% increase after Mizuho Securities initiated coverage with an outperform recommendation and a price target of $135. Meanwhile, Microsoft and AppLovin (NASDAQ:APP) have gained as well, reflecting the overall positive sentiment driven by today’s US retail sales report.

However, not all stocks are thriving. Atlassian (NASDAQ:TEAM) is down more than -2% following signs of insider selling. Defense companies like L3Harris Technologies (NYSE:LHX), Lockheed Martin (NYSE:LMT), and Northrop Grumman (NYSE:NOC) have also faced pressure amid geopolitical concerns.

In summary, the robust performance of US retail sales and corporate earnings is fueling market optimism, positioning stocks for continued gains as investors await further developments from the Federal Reserve.

Featured Image: Freepik @ wirestock

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