US Stocks Decline After Strong Retail Sales Data: Markets Wrap

US stock markets experienced a downturn as investors reacted to strong retail sales data from the US, while also closely monitoring the Federal Reserve’s upcoming rate decision.

The S&P 500 and the Nasdaq 100 both dropped by 0.5%. Meanwhile, the yield on 10-year US Treasuries remained stable at 4.40%. The Bloomberg Dollar Index showed fluctuations throughout the trading session.

Retail Sales Highlights

Retail sales in the US surged in November, highlighting consumer resilience during the critical holiday shopping period. This growth in retail spending has led to discussions about how it may influence the Federal Reserve's decisions regarding interest rates.

Ian Lyngen from BMO Capital Markets remarked that the recent retail sales report is unlikely to change expectations for the upcoming Federal Open Market Committee (FOMC) meeting, where a quarter-point cut in interest rates is anticipated. Investors believe that the Fed’s communication regarding potential rate adjustments in 2025 will be crucial.

Market Reactions and Recent Data

Moving forward, traders are focusing on Wednesday’s Fed announcement. There is uncertainty about future monetary policy, even though the US economy appears resilient. The possibility of inflationary pressures, exacerbated by anticipated import tariffs from the incoming administration, might affect the pace of rate adjustments.

“The impact of tomorrow’s Fed decision on stocks and bonds will largely depend on the guidance provided about future rate cuts, rather than the actual cut itself,” explained Tom Essaye, president of Sevens Report.

Positive economic indicators, such as the retail sales figures, could strengthen the case for the Fed to maintain its stance for now. Additionally, industrial production data indicated a decline for the third consecutive month in November, raising further questions about economic momentum.

Internationally, Canada's inflation rates decreased below the central bank’s target for the second time in three months, giving officials confidence that earlier rate cuts have not derailed their goal of controlling price growth.

Global Market Influence

In the UK, traders reduced their expectations for Bank of England rate cuts following a rise in wage growth. The probability of multiple cuts in 2025 diminished significantly after the new data.

Across Asia, the currency index hit its lowest level in two years due to concerns about China's economic outlook.

Oil prices slipped for a second consecutive day as worries regarding Chinese economic conditions dampened demand forecasts.

Key Market Movements

As of the latest updates, the major stock indices are as follows:

• S&P 500 fell by 0.5%
• Nasdaq 100 decreased by 0.5%
• Dow Jones Industrial Average declined by 0.5%
• Stoxx Europe 600 also saw a 0.5% drop
• MSCI World Index dropped by 0.4%

In currency markets, the Bloomberg Dollar Spot Index remained stable, while the euro and British pound showed little change. The Japanese yen increased by 0.3% against the dollar.

In the cryptocurrency sector, Bitcoin rose by 1.6%, while Ether saw a slight decline of 0.7%.

Bond markets were cautiously stable, with the yield on 10-year Treasuries hovering at 4.40%.

Finally, among commodities, West Texas Intermediate crude oil dropped by 1.2%, sitting at $69.87 a barrel, while spot gold fell by 0.5% to $2,640.51 an ounce.

This week features several key events that market participants will be watching closely, including economic data from the UK and Eurozone, the anticipated US rate decision, and revised GDP numbers.

stocks, retail, economy