Wall Street ends down as US retail sales data crimps rate cut bets

[January 18, 2024]  By Noel Randewich and Johann M Cherian

(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 fell to its lowest in over a week.

Amazon, Nvidia and Alphabet 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. [US/]

Tesla 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 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, 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.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 9, 2024. REUTERS/Brendan McDermid

Morgan Stanley fell 1.8% after analysts cut their ratings and price targets in the wake of the bank's fourth-quarter earnings. Bank of America and Citigroup 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 dropped 0.7% and closed at its lowest in over a month.

Charles Schwab dropped 1.3% after its fourth-quarter profit fell 47%.

Spirit Airlines tumbled 22%, down sharply for a second day after a U.S. judge on Tuesday blocked JetBlue from acquiring the carrier.

Ford Motor 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 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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