The U.S. stock market saw a positive performance on Tuesday, building on the previous session's momentum, driven by growing anticipation of rate cuts.
Despite retail sales remaining flat in June, traders found reason for optimism. As of 09:35 ET (13:35 GMT), the Dow Jones Industrial Average added 235 points, or 0.6%, while the S&P 500 and NASDAQ Composite rose by 18 points (0.3%) and 70 points (0.4%), respectively.
Stagnant Retail Sales; Rate Cut Optimism
June's U.S. retail sales showed no change from the previous month, holding steady after a revised 0.3% increase in May. Although this performance exceeded expectations of a 0.3% decline, consumer spending appears to be constrained by elevated interest rates, pushing households to prioritize essential products. Despite this, optimism is mounting that the Federal Reserve will initiate a cycle of rate cuts by September.
Fed Chair Jerome Powell recently hinted that the central bank’s confidence in decreasing inflation has grown, sparking predictions that we may soon see interest rate reductions. Powell's remark that the Fed doesn't need to hit a 2% inflation target before slashing rates has only intensified this sentiment. Some analysts predict a high chance of a 25 basis point cut in September and even a slight possibility of a more significant 50 basis point reduction.
Meanwhile, the banking sector remains a focal point, with Bank of America (NYSE: BAC) stock climbing approximately 3% thanks to Q2 revenue and profit outpacing expectations, buoyed by rising investment banking and asset management fees.
Oil Prices Head South
Oil prices declined on Tuesday due to persistent concerns over the Chinese economy's slowdown.
By 09:35 ET, U.S. crude futures had dropped 1.7%, settling at $79.48 per barrel, while Brent crude futures decreased by 1.6%, ending at $83.53 per barrel. As China, the world's second-largest economy and top crude importer, posts its weakest quarterly growth since early 2023, market watchers are also waiting for the latest U.S. crude inventory forecasts from the American Petroleum Institute.
