Today's Data Justifying Much of The Recent Weakness

In addition to looking at economic data, the Fed also gets an earful from their "contacts" in the community.  One would have to assume that those contacts weren't sounding the alarm too much in the run up to the September Fed meeting (the one with the scary dot plot).  Markets quickly began repositioning for "higher for longer" after that.  In addition, the key economic reports that followed have corroborated that stance to an uncanny degree (much higher NFP, core services inflation at 0.6% m/m, etc).  Now today's Retail Sales data adds itself to that list.

Sales came in at 0.7 vs 0.3 forecast with last month's 0.6 being revised up to 0.8.  There aren't really any great "yeah buts" to poke holes in the upbeat economic message.  The composition of spending indicates an upbeat consumer.  The top 5 spending categories were all substantially higher.

The market reacted logically with a quintessential "Fed implications" pattern.  Specifically, stronger data makes the Fed more likely to leave rates higher for longer, thus hurting both stocks and bonds (note: stocks subsequently bounced back).