US retail sales data dampens rate cut expectations, causing Wall Street to close lower
January 17, 2024 – 1:18 PM PST
(Reuters) – Wall Street stocks finished lower on Wednesday after upbeat December U.S. retail sales data eroded expectations the Federal Reserve will kick off its rate-cut campaign as early as March.
The benchmark S&P 500 (.SPX), fell to its lowest in over a week.
Amazon (AMZN.O), Nvidia (NVDA.O), and Alphabet (GOOGL.O), dipped between 0.5% and 1% and weighed on the S&P 500 as the 10-year Treasury yield rose to over 4.1%, its highest this year.
Tesla (TSLA.O), dropped 2% after the electric-vehicle maker slashed prices of its Model Y cars in Germany a week after reducing prices for some China models.
The interest rate-sensitive S&P 500 real estate sector index (.SPLRCR), tumbled 1.9%.
Data showed discounts from retailers and increased motor-vehicle purchases supported a higher-than-expected rise in U.S. retail sales, keeping the economy on a solid footing in 2024.
That reinforced the view that the Fed may not cut rates as quickly as previously expected this year.
Traders’ expectations of a 25-basis-point Fed rate in March dipped to 55%, from around 60% before the data was released.
U.S. stocks in recent weeks have relinquished some gains from a strong final two months of 2023.
“People’s positions are moderating from ‘all positive’ to ‘there’s still a lot of uncertainty out there,’” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta.
He cited Fed officials who have recently downplayed expectations of a quick start to rate cuts, and mixed economic data.
The CBOE Market Volatility Index (.VIX), a market fear gauge, rose to an over two-month high of 15.40 points during the day.
The S&P 500 remains down about 1% from its record high close in January 2022.
U.S. economic activity was little changed from December through early January, while firms reported pricing pressures were mixed and nearly all cited signs of a cooling labor market, the Fed said in its “Beige Book” report on Wednesday.
Morgan Stanley (MS.N), fell 1.8% after analysts cut their ratings and price targets in the wake of the bank’s fourth-quarter earnings. Bank of America (BAC.N), and Citigroup (C.N), each lost about 1%.
The S&P 500 declined 0.56% to end at 4,739.21 points.
The Nasdaq fell 0.59% to 14,855.62 points, while Dow Jones Industrial Average slid 0.25% to 37,266.67 points.
The small-cap Russell 2000 index (.RUT), dropped 0.7% and closed at its lowest in over a month.
Charles Schwab (SCHW.N), dropped 1.3% after its fourth-quarter profit fell 47%.
Spirit Airlines (SAVE.N), tumbled 22%, down sharply for a second day after a U.S. judge on Tuesday blocked JetBlue (JBLU.O), from acquiring the carrier.
Ford Motor (F.N), declined 1.7% after UBS downgraded the stock to “neutral” from “buy.”
Boeing gained 1.3% after the Federal Aviation Administration said inspections of an initial group of 737 MAX 9 airplanes had been completed.
Declining stocks outnumbered rising ones within the S&P 500 (.AD.SPX), by a 4.0-to-one ratio.
The S&P 500 posted 24 new highs and five new lows; the Nasdaq recorded 47 new highs and 219 new lows.
Volume on U.S. exchanges was relatively light, with 11.8 billion shares traded, compared to an average of 11.9 billion shares over the previous 20 sessions.
Reporting by Noel Randewich in Oakland, Calif., and by Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Pooja Desai and Richard Chang
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Which major companies experienced declines in their stock values following the release of retail sales data?
Title: Wall Street Stocks Finish Lower as Upbeat Retail Sales Data Lessen Rate-Cut Expectations
Introduction:
On January 17, 2024, Wall Street witnessed a decline in stocks, driven by December’s upbeat U.S. retail sales data. This data eroded expectations of an early rate-cut campaign by the Federal Reserve, contributing to a decrease in the benchmark S&P 500 and dampening investor sentiments. With key tech giants such as Amazon, Nvidia, and Alphabet experiencing a dip in their stock value, the 10-year Treasury yield reaching the highest point of the year, and the interest rate-sensitive real estate sector tumbling, the outlook for rate cuts and market performance has shifted. This article will delve into the factors that influenced the market decline and explore the possible implications for various sectors.
Impacted Stocks:
Several major companies experienced a decline in their stock values following the release of December’s retail sales data. Amazon, Nvidia, and Alphabet, all saw their stocks fall by 0.5% to 1%, thus contributing to the overall drop in the S&P 500. Tesla, on the other hand, saw a 2% decrease after reducing prices for some of its models in Germany. Furthermore, the S&P 500 real estate sector index tumbled 1.9%.
Retail Sales and Economic Outlook:
The retail sales data indicated a rise that exceeded expectations, primarily fueled by increased motor-vehicle purchases and retailer discounts. This unexpected growth has reinforced the view that the Federal Reserve may not initiate rate cuts as early as previously anticipated. Consequently, traders’ expectations of a 25-basis-point rate cut in March dipped to 55%, which is a decrease from around 60% prior to the data release. This shift in expectations reflects an evolving perspective of market uncertainty.
Investor Sentiments and Market Volatility:
The recent decline in the stock market reflects a moderation of investor positions from optimism to a more cautious outlook. While the final two months of 2023 delivered strong gains, recent mixed economic data and statements from Fed officials downplaying rate cuts have added to this uncertainty. The CBOE Market Volatility Index (VIX), a measure of market fear, rose to an over two-month high, indicating increased market volatility and investor concerns.
Banking and Other Sectors:
Morgan Stanley witnessed a 1.8% decline following analysts cutting their ratings and price targets in light of the bank’s Q4 earnings report. Additionally, Bank of America and Citigroup each experienced losses of around 1%. Charles Schwab saw its stock value drop by 1.3% after a 47% fall in its fourth-quarter profit. Furthermore, Spirit Airlines tumbled by 22% as a U.S. judge blocked JetBlue from acquiring the carrier. Ford Motor declined by 1.7% after being downgraded to “neutral” from “buy” by UBS.
Market Performance:
The S&P 500 declined by 0.56% to close at 4,739.21 points, while the Nasdaq fell by 0.59% to 14,855.62 points. The Dow Jones Industrial Average slid by 0.25% to 37,266.67 points. The small-cap Russell 2000 index also dropped by 0.7% and closed at its lowest point in over a month.
Conclusion:
The decline in Wall Street stocks on January 17, 2024, showcases the impact of December’s upbeat retail sales data and diminishing expectations of a rate-cut campaign by the Federal Reserve. Tech giants, interest rate-sensitive sectors, and various companies across different industries all experienced declines in stock values. Investor sentiments have shifted from a largely positive stance to one of caution due to mixed economic data and statements by Fed officials. Market volatility has also increased, as indicated by the rise in the CBOE Market Volatility Index. It remains to be seen how these factors will shape the trajectory of the stock market and investor sentiment in the coming months.
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