US stocks edged lower as investors stare at a weakening economy that will get tested by an inflation-fighting Fed. The latest round of data suggests the Fed can stick to aggressive rate hikes as the labor market remains strong and as the economy slowly softens. The risks of the Fed sending the economy into a severe recession are growing but right now the data doesn’t support that argument.
The consumer is still spending and apparently is not having any trouble finding work. The Nasdaq was led lower by Adobe shares, which were under pressure after announcing a deal to acquire software company Figma in a deal worth around $20 billion.
Another severe market rout was avoided after railroad companies and unions reached a tentative deal to avoid a strike. This agreement saved the economy from further intensifying inflationary pressures and avoided the US economy a daily economic hit of about $2 billion.
US Data
The US retail sales report was not as good as the headline number might indicate. The headline advance reading posted a 0.3% gain in August, much higher than the consensus estimate for a decline of 0.1%. The control group which feeds into GDP was flat. Overall, the sales report suggests the consumer is doing just fine. Auto sales climbed 2.8%, while retail and food services rose 0.3%. Furniture sales dropped 1.3%, while gasoline stations saw sales drop 4.2%.
The two Fed regional surveys posted significant declines with both prices paid and received, which is welcome news for the economy. The Empire manufacturing survey delivered another decline but was much better-than-expected, while the Philly Fed business outlook returned to negative territory.
Cryptos
Today is all about ethereum and its historic merge. The Merge paves the way for the world’s second-largest cryptocurrency to become more energy-efficient and to operate on a ‘proof-of-stake’ network. Crypto traders are often used to ‘sell the event’ reactions in the cryptoverse and this merge proved to be another example of just that. Ethereum is down significantly and volatility should remain elevated into the weekend.
The update went as planned and did not lead to any major outages. Despite today’s Merge success, ethereum still remains vulnerable in the short-term to further momentum selling, especially as traders await next week’s FOMC decision.
Significant weakness with tech stocks is also weighing on cryptos in general as bitcoin has fallen below the $20,000 level.
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With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
