U.S. Stock Market Reacts to Economic Indicators
U.S. stocks were falling on Tuesday, affected by disappointing data out of China and stronger-than-expected retail sales in the U.S., which fueled concerns about interest rates. As of 10:58 ET, the Dow Jones was down 306 points or 0.9%, while the S&P 500 and the Nasdaq Composite were both down nearly 0.9%.
China's Slowing Economy and Interest Rate Cut
Data on China's industrial output and retail sales indicated a slowing economy over the past month. In response, China's central bank made a surprising move by marginally cutting key interest rates on Tuesday.
U.S. Equities and Federal Reserve Expectations
In the U.S., the main equities indices posted gains on Monday, led by the Nasdaq Composite. Expectations that the Federal Reserve is nearing the end of its interest rate increases have fueled this sector during the year.
Global Investor Sentiment and Cash Allocations
Sentiment among global investors improved in August to its least bearish since February 2022. A Bank of America survey on Tuesday showed cash allocations falling to 4.8% from 5.3% and the underweight in equities narrowing to the smallest since April 2022.
U.S. Retail Sales and Impact on Federal Reserve Policy
The latest U.S. retail sales data for July exceeded expectations and could influence the Federal Reserve's next move. With gains higher than anticipated, the resilient consumer trend continues, and the Fed may decide to act further to calm inflation.
Earnings Reports and Consumer Spending Trends
Top retailers, including Home Depot, will report earnings this week. Home Depot beat profit expectations but had a dip in same-store sales, possibly firming up expectations on consumer spending trends for the upcoming holiday sales season.
Tesla's New Launches and Market Movements
Elsewhere, Tesla launched two cheaper versions of its Model S sedan and Model X SUV in the U.S. Homebuilders D.R. Horton and Lennar gained after Warren Buffett’s Berkshire Hathaway revealed new positions, while Discover Financial slumped after its CEO's resignation.
Crude Oil Prices and China’s Economic Growth
Crude prices fell Tuesday due to weak industrial production and retail sales data in China, reflecting slowed growth in the world's second-largest economy. Attention will now turn to the U.S. market, with upcoming inventory data releases expected to offer further insights.