[New York Stock Market] Rise on January Retail Sales Cooling... S&P 500 Hits All-Time High

January Retail Sales Down 0.8% from Previous Month
Industrial and Manufacturing Production Also Declines

The three major indices of the U.S. New York stock market all closed higher on the 15th (local time) following news of a decline in retail sales. The retail sales data for last month, released before the market opened, showed a much larger drop than Wall Street's expectations, leading to a buying sentiment that countered the overreaction to the inflation data announced two days earlier.

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On that day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, which is centered on blue-chip stocks, closed at 38,773.12, up 348.85 points (0.91%) from the previous session. The S&P 500, focused on large-cap stocks, closed at 5,029.73, up 29.11 points (0.58%), breaking its all-time high. The tech-heavy Nasdaq index ended the day at 15,906.17, up 47.03 points (0.3%).

By individual stocks, Tesla and Meta Platforms, the parent company of Facebook, rose 6.2% and 2.3%, respectively. Nvidia, which rose 2.5% the previous day to overtake Alphabet, Google's parent company, as the third-largest market cap, fell 1.7%, but maintained its third-place market cap position. Shake Shack, which posted strong earnings in Q4 last year, jumped 25.7%. Cisco fell 2.4% after announcing plans to cut 5% of its workforce and lowering its annual earnings outlook.

The retail sales data released that morning drove the influx of buying into the stock market. According to the U.S. Department of Commerce, January retail sales fell 0.8% month-over-month to $700.3 billion. This was the largest decline in about a year and a sharper drop than the Wall Street Journal (WSJ) forecast of -0.3%. The December retail sales growth was revised down from 0.6% to 0.4%. Retail sales are considered a key indicator supporting about two-thirds of the U.S. real economy and are used to assess overall economic trends. The decline in retail sales last month suggested the U.S. economy is cooling faster than expected, gradually rekindling hopes in the market that the possibility of interest rate cuts in the second quarter has not yet been extinguished.

However, the market remains largely unmoved regarding interest rate outlooks. According to the Chicago Mercantile Exchange (CME) FedWatch tool, federal funds futures on that day priced in a more than 36% chance that the Fed will cut rates by at least 0.25 percentage points in May, a level not significantly different from the 35% the previous day.

Amid a week of mixed indicators?retail sales decline confirmed just two days after a stronger-than-expected January Consumer Price Index (CPI) increase?the market is trying to gauge the Federal Reserve's future interest rate direction based on these data points.

The industrial production and employment data released that day also showed mixed results. U.S. industrial production in January fell 0.1% compared to December, with manufacturing production, which accounts for the largest share of industrial output, declining 0.5% month-over-month. On the other hand, the labor market remained robust. According to the U.S. Department of Labor, initial jobless claims for the week of February 4?10 dropped by 8,000 from the previous week to 212,000, below the expert forecast of 219,000.

Art Hogan, chief market strategist at B. Riley Asset Management, said, "With a moderately hot CPI, we overreacted. We think we will try to regain some of the correction during the rest of this week. Yesterday was a good example, and I think we are seeing the same kind of upward momentum today."

However, there are also views that market volatility could increase depending on upcoming data releases. Chris Larkin, managing director at Morgan Stanley E-Trade, analyzed, "Today's weak retail sales and moderate jobless claims can both help ease short-term market anxiety." However, he added, "The higher the market rally goes, the more vulnerable it becomes to declines when individual economic data do not align with rate cut discussions."

U.S. Treasury yields are moving within a narrow range. The 10-year U.S. Treasury yield, a global bond yield benchmark, fell 2 basis points (1 bp = 0.01 percentage points) from the previous trading day to 4.24%, while the 2-year yield, sensitive to monetary policy, rose 4 basis points to 4.58%.

International oil prices are rising more than 1% amid dollar selling triggered by the retail sales decline. West Texas Intermediate (WTI) crude oil rose $1.39 (1.8%) to $78.03 per barrel, and Brent crude increased 1.5% ($1.26) to $82.86 per barrel.