Dow Jones, Nasdaq, S&P 500 rally after strong retail sales

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Spencer Platt

The stock market is higher in choppy trading Friday as investors digest data in an attempt to predict the next Fed move.

The Dow (DJI) is +1.5%, the S&P (SP500) is +1.3%, and the Nasdaq (COMP.IND) is +1.1%.

The major averages popped off lows after preliminary Michigan sentiment numbers came out. While the healine index rose unexpectedly to 51.1, it was a drop in inflation expectations that helped sentiment the most.

Inflation expectations over the next 5-10 years, which the Fed says it is watching, dropped to 2.8% from 3.1%.

Rates moved down. The 10-year Treasury yield is down 3 basis points to 2.93% and the 2-year yield is down 3 basis points to 3.12%.

CME FedWatch now puts the chance of a 75-basis-point hike at 60%.

Earlier, Atlanta Fed President Raphael Bostic bolstered the case for 75 basis points, saying the last hike was a “big move” and the Fed wants to move in an orderly fashion and not hike “too dramatically.”

Elsewhere in economic data, retail sales and core retail sales rose 1% in June, topping forecasts. But gas and food prices were big contributors to the gains.

“Our preferred measure of core sales, which strips out autos, gasoline and food, rose at an 8.0% annualized rate in Q2, slowing only slightly from the 9.1% leap in Q1, and more than enough to signal a meaningful increase in real sales,” Pantheon Macro said. “In short, people did not fold in the face of the Ukraine shock and the subsequent surge in food and energy prices. Instead, they ran down a small part of their pandemic savings in order to keep up their discretionary spending, and we think they’ll do the same in Q3.”

Among bank results, BlackRock is down premarket after missing on earnings and Wells Fargo is slumping after missing on the top line. But Citi is rising with solid trading numbers.

See the stocks making the biggest moves this morning.