Investors are bracing for a fresh batch of economic data this morning, with April retail sales, weekly jobless claims, and import-export prices all scheduled for release at 8:30 a.m. EDT. The reports come just a day after a sharp rise in wholesale inflation rattled markets and tempered expectations for Federal Reserve rate cuts.
Retail sales are expected to climb 0.5% month-over-month, a notable deceleration from March's robust 1.7% gain. Core retail sales, which exclude automobiles, are forecast to rise 0.7%, down from the previous 1.9% increase. The retail control group, a key component for GDP calculations, is projected to advance 0.4%, compared to a 0.7% gain in March. These figures will offer insight into whether consumers are maintaining spending momentum amid higher energy costs and persistent inflation.
Weekly jobless claims are forecast at 205,000, up from the prior week's 200,000. Continuing claims fell to 1.766 million last week, the lowest level since January 2024, according to Reuters. The labor market remains tight, but any uptick in claims could signal softening demand for workers.
Import prices are expected to increase 1.0% in April, while export prices are seen rising 1.1%. These data points are particularly relevant as traders assess whether rising energy and shipping costs are filtering through supply chains. The Bureau of Labor Statistics' Producer Price Index (PPI) jumped 1.4% in April, pushing the year-over-year gain to 6.0%. Services rose 1.2%, goods increased 2.0%, and gasoline prices surged 15.6%. Consumer prices also climbed 0.6% in April, with a 3.8% annual increase.
Market expectations for a Fed rate cut have diminished following the inflation data. According to DeFi Rate's composite tracker, which aggregates odds from Kalshi, Polymarket, and Gemini, there is now a 97.5% probability the central bank will hold rates steady at its June 16-17 meeting. Polymarket data shows a 71% chance of no rate cuts in 2026, with a 30% probability of a rate hike this year.
Fed officials have reinforced a hawkish stance. Minneapolis Fed President Neel Kashkari stated the central bank is 'dead serious' about tackling inflation, while Boston Fed President Susan Collins noted that additional tightening could be necessary, though she does not anticipate policy tightening at this point.
Strong retail sales and hot import prices would reinforce the higher-for-longer rate narrative, especially after the PPI surprise. Conversely, a miss on the retail control group or a spike in jobless claims could signal that inflation is beginning to weigh on demand and hiring. UBS has delayed its rate cut expectations, with analyst Andrew Dubinsky noting that a September reduction still appears unlikely, as reported by Reuters.
Business inventories for March will be released at 10 a.m. EDT, providing additional context on supply chain dynamics. The data calendar remains challenging for the Fed, and today's releases will be closely watched for any shift in the economic outlook.
