US retail sales rose unexpectedly in August, according to Investing.com

Investing.com — U.S. stocks rose unexpectedly in August, potentially easing some concerns about a broader economic slowdown ahead of a major Federal Reserve interest rate decision this week.

On a monthly basis, retail sales rose 0.1%, slowing from an upwardly revised expansion of 1.1% in July, according to data from the Commerce Department's Census Bureau on Tuesday.

Economists had forecast a 0.2% decline in the figure, which is not adjusted for inflation and tracks mostly goods.

Excluding gasoline, automobiles, building materials and food services, the measure rose 0.3% last month, an upward revision of 0.4% in July. These so-called “core” retail sales add to the reading of gross domestic product, which is estimated to have grown about 2.5% on an annual basis in the July-September quarter, down from a 3.0% rate in the second quarter.

Traders are focusing on the conclusion of the Fed's latest two-day meeting this week. With markets already pricing in the start of an easing cycle that would bring rates down from a 23-year high of 5.25% to 5.5%, much of the conversation has focused on the scope of a September decision.

The odds of a 50-basis point cut this week — rather than a more traditional 25-basis point drawdown — currently stand at 67%, according to CME Group's (NASDAQ: ) closely watched FedWatch tool.

The possibility was even in the headlines last weekend, but the suggestion that such a reduction in bets for a jumbo cut was still an option was reinforced by media reports. Former New York Fed President Bill Dudley also argued that a bumper cut was needed because short-term interest rates are “well above” a neutral level that neither helps nor hinders economic activity.

Signs of slowing activity could prompt the Fed to make an over-sized reduction in borrowing costs to help stimulate the economy.

The latest retail sales reading is the last major data point before Fed officials make a decision, although analysts at Vital Knowledge said the return was “unlikely to dramatically change” the central bank's rate plans or broad narrative of hikes.

Policymakers are also currently weighing lingering stickiness in recent consumer price increases, as well as data pointing to slack in the American labor market. Fed Chair Jerome Powell said in August that “the time has come” to adjust monetary policy due to potential “downside risks” to the jobs picture.

US stock futures were trading higher following retail sales data, while the rate-sensitive 2-year Treasury yield rose. Yields generally move inversely to prices.