1. US Retail Sales Post Surprise Gain, Helped by Online Stores — The value of retail purchases, unadjusted for inflation, increased 0.1% after a revised 1.1% gain in July, Commerce Department data showed Tuesday. Excluding autos and gasoline stations, sales advanced for fourth month. Five of the report’s 13 categories posted increases, while others such as electronics and appliances, clothing and furniture fell. E-commerce merchants posted a solid 1.4% gain. Receipts at gasoline service stations decreased, reflecting cheaper prices at the pump.
The retail sales report showed so-called control-group sales — which are used to calculate gross domestic product — rose 0.3% in August. The measure excludes food services, auto dealers, building materials stores and gasoline stations.
2. Fed Cuts Rates by Half Point in Decisive Bid to Defend Economy — The Federal Reserve lowered its benchmark interest rate by a half percentage point Wednesday, an aggressive start to a policy shift aimed at bolstering the US labor market. Projections released following their two-day meeting showed a narrow majority, 10 of 19 officials, favored lowering rates by at least an additional half-point over their two remaining 2024 meetings. Seven policymakers supported another quarter-point rate reduction this year, while two opposed any further moves. The Federal Open Market Committee voted 11 to 1 to lower the federal funds rate to a range of 4.75% to 5%, after holding it for more than a year at its highest level in two decades. It was the Fed’s first rate cut in more than four years.
3. Jobless Claims: Weekly jobless claims remained stable, suggesting a strong labor market.
4. Consumer Spending: Retail sales saw moderate growth, reflecting healthy consumer spending, though some sectors raised concerns about potential slowdowns.
5. The Most Volatile Days for Stocks Before the Election, According to the Options Market — according to a team of strategists at Bank of America, who plotted what options traders are expecting each day before expiry. Traders anticipate swings of more than 1% in either direction on Oct. 4 and Nov. 1, when the September and October jobs reports are due to be released. Two other economic reports also have notable market-moving potential: the September CPI report, due Oct. 10, and the September retail sales report, on Oct. 17.
Options are also bracing for a roller-coaster ride during the week that starts on Oct. 21, one of the busiest of the coming third-quarter earnings reporting season. The week will feature results from Alphabet Inc., Microsoft, Meta and Amazon.

The week ahead — Economic data from Econoday.com:

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1. Core US Inflation Picks Up, Damping Odds of Outsize Fed Cut — the so-called core consumer price index — which excludes food and energy costs — increased 0.3% from July, the most in four months, and 3.2% from a year ago, Bureau of Labor Statistics figures showed Wednesday. The three-month annualized rate advanced 2.1%, picking up from 1.6% in July, according to Bloomberg calculations.
Economists see the core gauge as a better indicator of underlying inflation than the overall CPI. That measure climbed 0.2% from the prior month and 2.5% from a year ago in August, marking the fifth straight month the annual measure has eased and dragged down by cheaper gasoline prices.
2. Battery Maker Northvolt to Cut Jobs Amid Cooling EV Market — the Swedish battery maker is facing a challenging time as the adoption of EVs in Europe has slowed sharply on concerns over new trade tariffs, the withdrawal of some government incentives and a sluggish rollout of charging infrastructure. Meanwhile, European automakers are also facing increasingly stiff competition from lower-cost Chinese rivals, which have priced their vehicles aggressively and gained a foothold across Europe. The tougher backdrop recently saw BMW cancel a 2 billion euro ($2.22 billion) battery order, prompting Northvolt to reassess its growth strategy.
3. US Producer Prices Pick Up Slightly After Downward Revisions — the producer price index for final demand increased 0.2% from a month earlier following a flat reading in July, according to a Bureau of Labor Statistics report released Thursday. The median forecast in a Bloomberg survey of economists called for a 0.1% gain. Compared with a year ago, the PPI rose 1.7% — the least since early in 2024. A measure of producer prices excluding volatile food and energy categories climbed 0.3% in August from the prior month, and 2.4% from a year ago.
4. ECB Cuts Rates Again as Inflation Fades and Economy Stumbles — The European Central Bank lowered interest rates for the second time this year with inflation receding toward 2% and concerns about the economy building. The key deposit rate was cut by 25 basis points to 3.5% — as all analysts polled by Bloomberg predicted. The ECB reiterated that it can’t commit to a specific course for borrowing costs. Like its global peers, the ECB is getting more confident that consumer-price growth is returning to target following its historic spike. The euro zone’s 20-nation economy, meanwhile, is losing momentum. Households are failing to support the rebound that began earlier in the year and manufacturers remain in the doldrums due to soft demand from outside the single currency area.

The week ahead — Economic data from Econoday.com:

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1. US Job Openings Decline to Lowest Level Since January 2021 — US job openings fell in July to the lowest since the start of 2021 and layoffs rose, consistent with other signs of slowing demand for workers. Available positions decreased to 7.67 million from a downwardly revised 7.91 million reading in the prior month, the Bureau of Labor Statistics Job Openings and Labor Turnover Survey, known as JOLTS, showed Wednesday. The figure was lower than all estimates in a Bloomberg survey of economists. After July’s disappointing jobs figures and a large downward revision to payrolls in the past year, Fed officials and market participants are paying close attention to the August employment data due Friday — especially if another weak report could prompt an outsize rate cut.
2. Fed’s Beige Book Shows Stagnant, Declining US Economic Activity — Economic activity was flat or declining across most regions in the US in recent weeks, the Federal Reserve said in its Beige Book survey of regional contacts. Employment levels were generally flat to up slightly, according to the report released Wednesday. While reports of layoffs were rare, some firms noted cutting shifts and hours, leaving advertised positions unfilled or reducing headcount through attrition. The number of districts reporting flat or declining activity rose to nine in recent weeks, up from five in the prior period. Economic activity grew in three districts. Contacts, however, generally expected economic activity to remain stable or improve somewhat in coming months.
3. August payrolls grew by a less-than-expected 142,000, but unemployment rate ticked down to 4.2% — Nonfarm payrolls expanded by 142,000 during the month, up from 89,000 in July and below the 161,000 consensus forecast from Dow Jones, according to a report Friday from the Labor Department’s Bureau of Labor Statistics. At the same time, the unemployment rate ticked down to 4.2%, as expected. The labor force expanded by 120,000 for the month, helping push the jobless level down by 0.1 percentage point, though the labor force participation rate held at 62.7%. An alternative measure that includes discouraged workers and those holding part-time jobs for economic reasons edged up to 7.9%, its highest reading since October 2021. The household survey, which is used to calculate the unemployment rate and is often more volatile than the survey of establishments, showed employment growth of 168,000. The balance, though, tilted toward part-time employment, which increased by 527,000, while full-time fell by 438,000.

The week ahead — Economic data from Econoday.com:

When in doubt, get out and get a good night’s sleep. I’ve done that lots of times and the next day everything was clear… While you are in [the position], you can’t think. When you get out, then you can think clearly again. — Michael Marcus

1. US Economy Expands at Revised 3% Rate on Resilient Consumer — Gross domestic product rose at a 3% annualized rate during the April-June period, up from the previous estimate of 2.8%, according to Bureau of Economic Analysis figures published Thursday. The economy’s main growth engine — personal spending — advanced 2.9%, versus the prior estimate of 2.3%. The other main gauge of economic activity — gross domestic income — rose a more moderate 1.3% in the government’s first estimate for the period, matching the first-quarter gain. Whereas GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing those same goods and services. The average of the two growth measures was 2.1%.
2. US Pending Home Sales Gauge Drops to Lowest on Record — A National Association of Realtors index of contract signings fell 5.5% to 70.2 last month, the lowest in data back to 2001, the group said Thursday. The drop was larger than all estimates in a Bloomberg survey of economists and reflected declining sales in all four major regions. “The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming US presidential election,” NAR Chief Economist Lawrence Yun in a statement.
The previously owned home market has been hamstrung by high borrowing costs and lean inventory for nearly two years. While mortgage rates have declined this month to the lowest in over a year, high prices and limited inventory are deterring prospective buyers who might still be holding out for cheaper rates.
3. Apple, Nvidia Are in Talks to Invest in OpenAI — The investment would be part of a new OpenAI fundraising round that would value the ChatGPT maker above $100 billion, people familiar with the situation said. The Wall Street Journal reported Wednesday that venture-capital firm Thrive Capital is leading the round, which will total several billion dollars, and Microsoft MSFT 0.61%increase; green up pointing triangle is also expected to participate. It couldn’t be learned how much Apple, Nvidia or Microsoft will invest into OpenAI this round. To date, Microsoft has been the primary strategic investor in OpenAI. It owns a 49% share of the AI startup’s profits after investing $13 billion since 2019. Apple in June announced OpenAI as the first official partner for Apple Intelligence, its system for infusing AI features throughout its operating system. The new AI will feature an improved Siri voice assistant, text proofreading and creating custom emojis.
4. Fed Favored Inflation Gauge’s Mild Gain Sets Stage for Rate Cut — The so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 0.2% from June, according to Bureau of Economic Analysis data out Friday. On a three-month annualized basis — a metric economists say paints a more accurate picture of the trajectory of inflation — it advanced 1.7%, the slowest this year. While spending picked up, income growth was much more sluggish and the saving rate declined. That may raise questions about the durability of consumer spending going forward. Friday’s report supports the view that it’s time to begin unwinding the restrictiveness of monetary policy. Combined with emerging cracks in the labor market, the sustained cooling in inflation explains why Fed Chair Jerome Powell said last week “the time has come” for central bankers to start lowering borrowing costs, likely next month.

The week ahead — Economic data from Econoday.com: