NEW YORK (AP) — US stocks slipped Thursday after a mixed batch of economic data seemed to drive the final nail into hopes that easier interest rates may arrive very soon.
The S&P 500 fell 14.83 points, or 0.3 per cent, to 5,150.48, though it’s still close to its all-time high set Tuesday. The Dow Jones Industrial Average sank 137.66, or 0.4 per cent, to 38,905.66, and the Nasdaq composite lost 49.24, or 0.3 per cent, to 16,128.53.
The moves were more decisive in the bond market, where Treasury yields rose after a report showed inflation was a touch hotter at the wholesale level last month than economists expected. It’s the latest in a string of data on inflation that’s been worse than forecast, which has kept the door closed on earlier hopes that the Federal Reserve could start cutting interest rates at its meeting next week.
But other reports released Thursday also showed some softening in the economy, which kept alive hopes that the long-term trend for inflation remains downward.
Traders still largely expect the Fed to begin cutting rates in June, according to data from CME Group. The Fed’s main rate is at its highest level since 2001 in hopes of grinding down inflation, and cuts would relieve pressure on the economy and financial system.
The question hanging over Wall Street is how much the latest signals of potentially stubborn inflation will ultimately delay rate cuts. That in turn could damage the huge run US stocks have been on since late October, rising in 16 of the last 19 weeks.
Traders on Thursday pushed some bets for the first cut to interest rates into July from June.
The day’s mix of data could push the Federal Reserve to signal it foresees only two cuts to rates this year, down from three, according to Brian Jacobsen, chief economist at Annex Wealth Management.
Fed officials will give their latest forecasts for where they see interest rates heading this year on Wednesday, following their latest policy meeting.
Among the data they’ll mull is a report from Thursday that said shoppers spent less at US retailers last month than economists expected. Such data drags on the overall economy but could also remove upward pressure on inflation.
The government also said retail sales were weaker in January than earlier thought. Strong spending by US households has been one of the linchpins keeping the economy out of a recession despite high interest rates.
A separate report said fewer US workers applied for unemployment benefits last week than expected. That’s good news for workers generally. But too much strength in the job market, which has remained remarkably resilient, could add upward pressure on inflation.
The mix of data sent the yield on the 10-year Treasury up to 4.28 per cent from 4.19 per cent late Wednesday. The two-year yield, which more closely tracks expectations for the Fed, rose to 4.69 per cent from 4.63 per cent.
On Wall Street, Dollar General swung sharply despite reporting stronger profit and revenue for the latest quarter than expected. Its stock fell 5.1 per cent after being up more than 6 per cent earlier.
Dollar General executives said inflation is pushing customers to make trade-offs in the aisles, away from non-essentials and name brands. It’s also removing self-checkout from more than 300 of its stores that are experiencing high losses of inventories.
A day earlier, rival Dollar Tree tumbled after reporting weaker-than-expected results and saying it would close hundreds of its Family Dollar stores.
Dick’s Sporting Goods jumped 15.5 per cent after it reported stronger profit for the latest quarter than expected and increased its dividend.
Robinhood Markets gained 5.2 per cent as near-record stock and crypto prices drove strong growth in trading activity among its customers last month.
US Steel sank 6.4 per cent after President Joe Biden came out in opposition of the planned sale of the company to Nippon Steel of Japan.
Nippon Steel announced in December that it planned to buy the Pittsburgh-based steel producer for USD14.1 billion in cash, raising concerns about what the transaction could mean for unionised workers, supply chains and US national security.
Shares of Anheuser-Busch InBev trading in the United States slumped 5.5 per cent after Altria said it was selling a portion of its stake in the maker of Budweiser.
Homebuilder Lennar sank 7.6 per cent despite reporting stronger growth in profit than expected, as its revenue fell short of analysts’ forecasts.
In stock markets abroad, indexes were mixed across Europe and Asia.
Japan’s Nikkei 225 rose 0.3 per cent, as speculation rose that the Bank of Japan may soon end its policy to keep interest rates below zero.
