Today The Market Is In “Give Back Some Of Those Gains” Mode On A Disappointing Retail Sales Report

It would be an overstatement, in my opinion, to say the market is trendless. I think there’s a definite and but unspectacular bias to the upside in the short-term–four weeks, say.

It would be accurate, however, to say, there’s not much conviction to that trend. So the market gives back some upside gains whenever there’s a big of disappointing news.

Which is what I think we’re got today. Headline U.S. retail sales unexpectedly posted the first decline in seven months with overall sales falling 0.3% in September from August. Economists surveyed by Bloomberg had forecast a 0.3% gain in September sales. (August sales were revised upward to a 0.6% increase.)

The sales report that economists tend to trust more than the headline number–retail sales excluding food services, car dealers, building -material stores and gasoline stations–was essentially unchanged in September. Economists had been looking for a 0.3% gain in this number.

As you might expect, the disappointing retail sales number increased belief on Wall Street in an interest rate cut from the Federal Reserve at its October 30 meeting. Odds of a 25 basis point interest rate cut at that meeting rose to 89.3% today on the CME FedWatch Tool from 73.8% yesterday and 80.2% on October 9.

And that led to gains in Treasury prices with the accompanying drop in yields.The yield on the 10-year Treasury fell 3 basis points to 1.74%. The yield on the 2-year Treasury also fell 3 basis points to 1.59%.

Which has turned stocks into very modest losers and bond ETFs into very modest winners today. As of 2 p.m. New York time the Standard & Poor’s 500 stock index was down 0.27% and the Dow Jones Industrial Average was off 0.08%.  The Vanguard Short-term Treasury Index Fund ETF (VGSH) had gained 0.10% and the Vanguard Intermediate-tern Treasury Index Fund ETF (VGIT) was higher by 0.22%. Barrick Gold (GOLD) and First Majestic Silver (AG), gold and silver stocks, respectively, that leverage gains in the metals themselves, were up 1.32% and 7.62%

The Vanguard ETFs, Barrick Gold, and First Majestic are all members of my online portfolios.