Retail Sales Soar In July, Weekly Jobless Claims Undercut Expectations: Traders Lean Towards 25-Basis-Point Cut In September

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U.S. retail sales soared by 1% month-over-month in July, sharply rebounding from stagnation in June and far outpacing the anticipated 0.3%, according to preliminary estimates released Thursday.

At the same time, initial jobless claims fell short of expectations last week, signaling easing concerns in labor market conditions.

July Retail Sales Report: Key Highlights

  • On a year-over-year basis, retail sales increased by 2.7% in July, picking up from a downwardly revised 2% rise in June.
  • Excluding motor vehicles and parts, retail sales grew by 0.4% month-over-month, down from an upwardly revised 0.5% in June but topping economist expectations of 0.1% as tracked by TradingEconomics.
  • When excluding gasoline, motor vehicles, and parts, retail sales rose by 0.4% month-over-month in July, easing from a 0.8% increase in June.
  • Among spending categories, the largest monthly gains were recorded in motor vehicle and parts dealers, with a 3.6% increase, followed by electronics and appliance stores, which saw a 1.6% rise.
  • Conversely, miscellaneous store retailers experienced the steepest decline, with sales dropping 2.5%.
Unemployment Benefits Report: Key Highlights

  • Initial unemployment benefits totaled 227,000 for the week ending Aug. 9, down from 234,000 in the previous week and missing the expected 235,000.
  • The four-week moving average of weekly jobless claims, which smooths out weekly volatility, fell from 241,000 to 236,500.
  • Continuing claims inched down from revised 1.871 million to 1.864 million, falling short of the forecasted 1.88 million.
Market Reactions

Prior to Thursday's economic data, traders had assigned a 63% chance of a 25-basis-point interest rate cut at the Federal Reserve's September meeting, up from 45% a week ago.

In Thursday's premarket trading, U.S. index futures were in positive territory. As of 8:37 a.m. ET, Nasdaq 100 futures were up 0.8%, S&P 500 futures gained 0.7% and Dow Jones futures edged higher by 0.6%. Both Treasury yields and the dollar rose.

On Wednesday, both the SPDR S&P 500 ETF Trust (NYSE: SPY) and the Invesco QQQ Trust (NASDAQ: QQQ) notched their fifth straight session of gains.