Consumer Inflation, Retail Sales Soft In June, Industry Solid

The consumer price index was unchanged in June, while core prices, stripping out food and energy, edged up just 0.1%, the Labor Department reported on Friday.

The core CPI data came in below expectations of a 0.2% rise, which likely will further reduce odds of another Federal Reserve rate hike in coming months.

Compared to a year ago, overall consumer price inflation is up 1.6%, the smallest gain since October. Cor CPI inflation was 1.7%, same as in May. The Federal Reserve has set a 2% inflation target. Its favorite price gauge, the core PCE deflator, shows even milder inflation.

Meanwhile, the Commerce Department reported that retail sales slipped 0.2% in June, while sales excluding autos also declined 0.2% from May.


Wall Street expected a 0.1% gain in overall retail sales and a 0.2% rise ex-autos.

Upon release of the retail sales and inflation data, futures were little changed on the stock market today, though Nasdaq futures moved higher. However, the 10-year Treasury yield and U.S. dollar continued to head lower.

But industrial production rose 0.4%, just above expectations, with May revised up to a slim gain, the Federal Reserve reported. Manufacturing output rose 0.2%.

Investors are paying especially close attention to inflation readings after hawkish signals from the Fed and, even more so, from the European Central Bank tripped up markets in late June, sending technology stocks including Amazon (AMZN) into a brief tailspin. Amazon is now back above its 50-day moving average and regained the 1000 mark on Wednesday as Fed chief Janet Yellen signaled that rate hikes could pause if inflation readings continue to come in on the soft side.

Sales at nonstore retailers led by Amazon and building materials suppliers such as Home Depot (HD) have been among the strongest categories, while sales at department stores such as Macy's (M) continue to bleed.

Amazon and other other nonstore retailer sales rose a so-so 0.4% on the month, with the annual gain slipping into single digits at 9.2%. Amazon just held its third annual Prime Day on July 11, reporting a 60% increase in sales.

Building material and garden store sales increased 0.5% from May and 5.1% from a year ago.

Overall general merchandise stores led by Wal-Mart (WMT) saw a 0.4% rise in sales from May. The department store category, a subsector of general merchandise, saw sales slip 0.7%.

Wal-Mart shares were on the rise early Friday after an upgrade from Goldman Sachs, but the stock remains just below its 50-day moving average, which it has yet to retake after sinking on Amazon's announced acquisition of Whole Foods Market (WFM).

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