US Q3 GDP could be expected to come out strong after the release of the US retail sales yesterday showed rise of 0.7% in September. As this is way above the expected 0.3%, it shows American shoppers are still willing to spend.
US retail sales showed Americans are still shopping
Retail sales for the month of September, a crucial indicator of the health of domestic demand and one of the key drivers of GDP, were released yesterday.
The results were better than expected, with 0.7% exceeding the 0.3% forecast. This shows that the North American economy is continuing to exhibit great strength and is far from being weakened by rising interest rates.
The market reacted with a sharp rise in bond yields
The immediate reaction in the market was a sharp rise in bond yields (market interest rates), which took the 10-year bond up to 4.85%. This is close to the last highs reached.
The effect of the war in Israel, which caused a substantial drop in bond yields due to purchases of government bonds in search of safe-haven assets, has faded for now. As a result, the market is returning to economic fundamentals.
Nvidia affected by restrictions on sales of microchip technology to China
Although the earnings season is not disappointing investors with better-than-expected results in the banking sector, the stock market was greatly affected by the increased pressure on interest rates.
The results of the majority of companies, including the mega-capitalized technological ones, still remain unknown. Today Tesla and Netflix will report. Yesterday, one of the stocks with the worst performance was Nvidia. Its stock fell 8% during the session after the North American government announced restrictive measures on the sale of Microchips technology to China, one of Nvidia's main export destinations.
Nvidia's weight in the Nasdaq index is high, so its fall contributed to the poor performance of the index.
Markets wait for updates on Israel-Hamas war
In preparation for events like the arrival of the US president in Israel, the situation is now on standby. Any decision that can be reached through the mediation of the United States and prevents the war in the region from escalating would have an immediate impact on the market. Gold and oil would be the main assets to be affected. They have both risen sharply since the start of the conflicts, so if the tension eases, gold and oil should experience a bearish correction.
Nvidia monthly chart, October 18, 2023. Source: CAPEX.com WebTrader.
Key Takeaways
- US retail sales for September came out at 0.7%, beating expectations of 0.3%.
- This could indicate a strong Q3 GDP.
- The market saw a sharp rise in bond yields.
- The stock market fell because of upward pressure on interest rates.
- Earnings season reports from the banking sector came out better-than-expected.
- Tesla and Netflix will report today.
- Nvidia suffered after an announcement that restrictions will be put on the sale of microchip technology to China.
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Sources: Bloomberg, Reuters
