Retail sales slip as markets turn focus to the Fed's policy statement

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Published Date 9/16/2020

The FOMC meeting is at 2:00 pm ET, and Powell's press conference is at 2:30 pm. Those are the headlines and the dominant influence today.

Not so good news this morning for August retail sales. Sales were expected to have increased 1.0%, as reported +0.6%; ex-auto sales expected 1.0%, up just 0.7%. The control group that excludes food services, autos, gasoline, and building materials, expected +0.5%, declined by 0.2%. The control group is more reliable as a measure of demand. The slowdown due to the end of the relief for jobless Americans and small businesses at the end of July; without them, millions of unemployed Americans will have significantly less cash to spend. Also, federal support for small businesses is running dry with the Paycheck Protection Program closing in early August.

Sales are slipping on continued consumer concerns and money withheld from another stimulus bill that is dying in Washington. Nancy Pelosi refuses to bend, Republicans also ridged. She is not going to compromise in any way, according to news sources and her remarks. Trump has offered $1.5 trillion in assistance, but it falls short of the cement wall of $2.2 trillion that Democrats passed in a bill last May. Pelosi calling $1.5 trillion a "skinny" offer by Republicans, saying "the skinny deal is a Republican bill: That's not a deal at all." There was a bi-partisan of 50 House members backing the "skinny" plan, Pelosi told the committee chairs to dismiss it out of hand.

At 9:30 am ET, the DJIA opened +66 after trading +130 prior to the retail sales data, NASDAQ +36, S&P +13. 10 yr 0.67% -1 bp. 2.5 30 yr FNMA coupon at 9:30 am +2 bp and -8 bps from 9:30 am. 2.0 coupon at 9:30 am+3 bps from yesterday's close and -9 bp from 9:30 yesterday.

Earlier this morning, MBA mortgage applications last week; the composite -2.5%, purchases -1.0%, and re-finances -4.0%.

At 10:00 am ET Sept NAHB housing market index expected unchanged at 78 from August as released, the index increased to 83, the strongest index reading in 35 years.

There's nothing to do now but wait for the FOMC policy statement at 2:00 pm ET this afternoon. Not likely there will be any significant movements in US financial markets until this afternoon after the 2:30 pm Powell's presser. Usually, there are brief bouts of volatility after the event(s).

Source: TBWS

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