(Bloomberg)
(Bloomberg)

US stocks slump on head-scratching retail data

  • The S&P 500 fell 0.3% after the US Commerce Department reported the worst drop for retail sales in 9 years
  • The Dow Jones fell 0.4% and the Nasdaq 100 was little changed

US stocks declined, Treasuries advanced and the dollar retreated after a report of declining retail sales suggested economic growth is slowing. Compounding the domestic pressure is word that the US and China remain at loggerheads in trade negotiations.

The S&P 500 Index and Dow Jones Industrial Average sank Thursday after the US Commerce Department reported the worst drop for retail sales in nine years, while initial jobless claims came in higher than estimated.

The December sales data, delayed by four weeks due to the government shutdown, may reinforce the expectation that the Federal Reserve will avoid raising rates this year. But some observers suggested the retail figures are out of sync with reality -- including by possibly undercounting online transactions -- which could explain why indexes climbed from their early lows after the initial shock.

Bank stocks were among the hardest hit, as the 10-year Treasury yield briefly sank below 2.65%. Defensive shares and companies with high dividend yields fell the least. Coca-Cola saw its biggest intraday loss in three years after selling fewer drinks in the Americas in the fourth quarter. Tech shares were buoyed by chipmakers and a positive earnings report from Cisco, mitigating the drop in the broader equity market.

Trade tensions between the US and China continue to weigh on stocks, with the two sides said to be far apart on reform demands as high-level talks begin in Beijing. Earlier this week, shares had gained on reports that President Donald Trump was considering pushing back the deadline for imposition of higher tariffs on Chinese imports by 60 days. Trump also told reporters that trade talks are making good progress, helping to steady investor sentiment. The likelihood that the US will avoid a second government shutdown has also propped up stocks this week.

Food and industrial-goods shares had spurred the Stoxx Europe 600 Index amid a slew of company news, but its tracked the slide in US equities. Stock benchmarks drifted in Japan, China and Australia, and ticked lower in Hong Kong. European core sovereign bonds rose and the single currency strengthened after data showed the euro region’s biggest economy stagnated in the fourth quarter, but dodged recession.

Elsewhere, emerging-market shares and currencies fell. Russia’s 10-year bonds dropped the most since since November after the US Senate introduced sanctions legislation targeting the country’s banks and state debt.

Oil was little changed as falling shipments from Saudi Arabia and Venezuela were countered by gains in US crude stockpiles as well as signs of cooling growth. And the pound weakened while gilts advanced ahead of Parliament’s latest set of votes on Theresa May’s Brexit strategy, and after dovish remarks from a Bank of England policy maker.

These are the main moves in markets:

Stocks

The S&P 500 Index fell 0.3% as of 11:53 am New York time. The Dow Jones Industrial Average fell 0.4% and the Nasdaq 100 was little changed. The Stoxx Europe 600 Index fell 0.3%. The U.K.’s FTSE 100 Index rose 0.1%. The MSCI Emerging Market Index sank 0.6%.

Currencies

The Bloomberg Dollar Spot Index rose less than 0.05%. The euro rose 0.2% to $1.1282. The British pound fell 0.4% to $1.2795. The Japanese yen rose 0.3% to 110.70 per dollar.

Bonds

The yield on 10-year Treasuries sank four basis points to 2.66%, the biggest drop in two weeks. Germany’s 10-year yield fell two basis points to 0.10%. Britain’s 10-year yield fell three basis points to 1.147%.

Commodities

West Texas Intermediate crude rose 0.1% to $53.98 a barrel. Gold climbed 0.4% to $1,311.31 an ounce.

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