Stock Market Update

The stock market is on track for a lower start with futures on the S&P 500 trading 32 points below fair value.

Geopolitical concerns are back in the picture this morning, exerting some pressure on sentiment. This comes after President Trump left the G7 summit early and requested a Situation Room meeting with the national security council. The president also called on residents of Tehran to evacuate the city.

Besides weighing on equity futures, the developments have given a boost to the price of oil, sending WTI crude higher by $0.81, or 1.1%, to $72.58/bbl.

Despite the lower indication in futures, homebuilders could see some early strength, as Lennar (LEN 110.78, +1.29, +1.2%) is set to open higher after missing Q2 EPS expectations on above-consensus revenue.

Economic data released this morning included weaker-than-expected Retail sales, which declined 0.9% month-over-month in May (Briefing.com consensus -0.6%) following a downwardly revised 0.1% decline (from 0.1%) in April. Excluding autos, retail sales fell 0.3% month-over-month (Briefing.com consensus 0.1%) following a downwardly revised unchanged reading (from 0.1%) in April.

This was not a good report in terms of hard economic data. It reflected a more cautious-minded consumer, who, in general, pulled back spending on goods. Clothing and accessories store sales (+0.8%) were a surprising outlier, but otherwise, there was a retrenchment in spending in many discretionary categories, including electronics and appliance store sales (-0.6%) and food services and drinking places (-0.9%). This report will help support arguments that the Fed should be cutting rates soon.

Separately, import prices were unchanged in May after increasing 0.1% in April while import prices excluding oil rose 0.3% after increasing 0.4% in April. Export prices were down 0.9% in May after rising 0.1% in April while export prices excluding agriculture were down 1.0% after rising 0.1% in April.

Just released, industrial production declined 0.2% in May (Brieifng.com consensus 0.0%) after increasing a revised 0.1% in April (from 0.0%). Capacity utilization decreased to 77.4% (Briefing.com consensus 77.7%) from 77.7% in April.

Treasuries trade near their early highs with the 10-yr yield falling four basis points to 4.42%.