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Stock index futures pointed to a lower open Tuesday following a solid rally to start the week.
S&P futures (SPX) -0.3%, Nasdaq 100 futures (NDX:IND) -0.4% and Dow futures (INDU) -0.2% were down.
“Markets seems to be taking the geopolitical risk session by session at the moment, rather than having any strategic sense of where things are heading,” Deutsche Bank’s Jim Reid said. “It feels like we’re in a very dangerous and delicate holding pattern for now, but with no major developments since the Israeli evacuation notice to Gaza residents on Friday, markets have taken off their weekend hedges over the last 24 hours or so.”
September industrial production figures hit right before the opening bell. The forecast is for a 0.1% rise.
“US retail sales and industrial production today will be a chance for the macro to compete with the geopolitics again for bonds.”
Rates continued to move up. The 10-year Treasury yield (US10Y) rose 6 basis points to 4.76%. The 2-year yield (US2Y) rose 2 basis point to 5.12%.
Monday’s “bond sell-off was matched by growing anticipation that the Fed might deliver another rate hike in 2023 after all, with pricing for a hike by December up from 32% at the close last week, to 37% yesterday,” Reid said. “The long-end sell off was shared across real yields and breakevens, with the 10yr real yield up +4.5bps to 2.32%, and the 30yr real yield was up +5.3bps to 2.42%.”
September retail sales arrive before the bell. Economists expect the headline number to be up 0.3% for the month, with core sales up 0.2%.
“The bigger picture here is that pent-up demand for autos from the period of supply constraints in 2021/early 2022 appears to be exhausted,” Pantheon Macro’s Ian Shepherdson said. “Auto sales now are being driven by more traditional cyclical forces, most notably the cost of financing, which is rapidly becoming prohibitive for many would-be buyers.”
“In the core retail sales numbers, sales of building materials, equipment and hardware, already are falling outright, lagging last year’s collapse in existing home sales.”
“U.S. consumers cannot really afford Beyoncé concert tickets and new televisions at the same time, and obviously Beyoncé is prioritized,” UBS’ Paul Donovan said. “That mediocre demand for goods helps explain why durable goods prices slipped so quickly into deflation last year. Of course, a lot of the goods purchased in the US are made in Mexico, but US production data is relevant.”
“New York Federal Reserve President Williams will be speaking at the Economic Club of New York – because economists are social. Demented and sad, but social.”
