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S&P 500 Dips on Soft US Retail Sales, Raising Likelihood of Fed QE Twist

S&P 500 Dips on Soft US Retail Sales, Raising Likelihood of Fed QE Twist

Justin McQueen,
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S&P 500 Analysis and News

  • S&P 500 Dip in Retail Sales Drop
  • Short Risks Do Remain with Upside Somewhat ExhaustedFed QE Twist Touted
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S&P 500 Dips Back to 3600 Following Retail Sales Drop

US retail sales softer across the board having missed expectations while revisions had also been weaker than prior. The headline rate posted its slowest rise in 6-months with a 0.3% gains vs the expected 0.5% rise. While the retail sales control group, which is typically used as a gauge for demand in GDP models, saw a 0.1% rise, thus raising the likelihood that GDP forecasts will be downgraded.

Market reaction: Following the weaker report, S&P 500 futures had seen a slight dip back towards 3600. However, the FX has been a mixed back with USD pullback benefitting both the Japanese Yen and Euro, while high-beta currencies (CAD, NZD, AUD) have tracked risk assets lower. The focus for risk assets now is that with much of the good news priced in regarding vaccine optimism, markets are faced with more short term uncertainties, thus risk reward is beginning to support a more defensive bias

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Fed QE Twist Touted

In response to the retail sales data, Fed’s Bostic noted that he would be watching to see if weakness in retail sales translates into something deeper. Alongside this, Bostic further hinted that a possible change in current monetary policy measures could take place in December with many touting that the Fed could look to increase weighted average maturity i.e. purchasing bonds further out the curve.

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