S&P500 falls after retail sales data for December comes in better than expected

Stocks fell Wednesday as Treasury yields tracked higher following the release of stronger-than-expected U.S. economic data.

Retail sales data for December came in stronger-than-expected, indicating a resilient consumer and putting aggressive rate cuts from the Federal Reserve into doubt. Retail sales were up 0.6 per cent from November, and gained 0.4 per cent month-over-month excluding autos. Economists polled by Dow Jones had estimated a 0.4 per cent month-to-month increase in retail sales and 0.2 per cent ex-autos.

The 10-year Treasury yield was last trading 4 basis points higher at 4.11 per cent, continuing its rise from Tuesday after Federal Reserve Governor Christopher Waller warned easing monetary policy may come slower than anticipated.

So far, traders are pricing in a roughly 52 per cent chance that the Federal Reserve begins cutting rates in March as hopes mount for a pivot, according to CME Group’s FedWatch tool.

The Dow Jones Industrial Average declined 94.45 points, or 0.25 per cent, to close at 37,266.67. This marked the third straight day of losses for the 30-stock index. The S&P 500 slid 0.56 per cent to close at 4,739.21, and the Nasdaq Composite lost 0.59 per cent, ending the session at 14,855.62.

Charles Schwab shed 1.3 per cent after reporting mixed quarterly results. Walgreens and Caterpillar both dropped about 3 per cent, leading the Dow’s losses. Meanwhile, Boeing advanced 1.3 per cent, making it one of the biggest gainers in the Dow after recent sharp losses.

In commodity-related news, iron ore, oil, and gold, declined, with gold nearing a drop below $2,000 per ounce.

Shifting to US sectors, all closed lower overnight. Real Estate and Utilities were the worst performers, whilst Consumer Staples recorded the fewest losses.

In the UK, headline CPI came in at 4 per cent and core CPI was 5.1 per cent, which was slightly higher than expectations, delaying a potential Bank of England pivot towards rate cuts.

The UK 10-year note yield surged by 19 basis points to 3.98 per cent, and this disappointing CPI report indicates that the Bank of England is still distant from having sufficient evidence to confidently lower rates.

Additionally, China's recent data and weak consumer confidence are impacting overall market sentiment and retail sales figures are expected to remain volatile.

Looking ahead to the Australian market, shares are likely to fall due to inflation data in the UK and strong US retail sales, reinforcing the argument that rate cuts may be imminent. Additionally, on Thursday, Ampol, BHP, and Yancoal are scheduled to release their production updates.

Futures

The SPI futures are pointing to a 0.3 per cent fall.

Currency

One Australian dollar at 8.30am was buying 65.52 US cents.

Commodities

Gold lost 1.08 per cent. Silver fell 1.64 per cent. Copper lost 0.64 per cent. Oil added 0.55 per cent.

Figures around the globe

European markets closed lower. London’s FTSE fell 1.48 per cent, Frankfurt lost 0.84 per cent, and Paris closed 1.07 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei lost 0.40 per cent, Hong Kong’s Hang Seng dropped 3.71 per cent and China’s Shanghai Composite closed 2.09 per cent lower.

The Australian share market closed 0.29 per cent lower at 7,393.08.

Ex-dividends
Plato Inc Max (ASX:PL8) is paying 0.55 cents fully franked
Spheria Emerging Co (ASX:SEC) is paying 2.9 cents fully franked

Dividends payable
Garda Property Group (ASX:GDF)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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