[New York Stock Market] US Retail Sales Hit 3-Year Low...Stocks End Lower on Economic Slowdown Fears

December Retail Sales Flat at 0%...Stoking Economic Slowdown Fears

Reuters and Yonhap News Agency

As U.S. retail sales for December of last year came in well below expectations, the three major New York stock indexes ended mixed. A wait-and-see mood ahead of the release of the January nonfarm payrolls data the following day also weighed on the market.

On the New York Stock Exchange, the blue-chip Dow Jones Industrial Average closed at 50,188.14, up 52.27 points (+0.10%) from the previous session. The large-cap S&P 500 Index fell 23.01 points (-0.33%) to 6,941.81, while the tech-heavy Nasdaq Composite declined 136.20 points (-0.59%) to 23,102.47.

The Dow opened higher and hit an all-time intraday high, but lost momentum toward the close. The main drag was concern over economic weakness after U.S. December retail sales, released that day, came in far below forecasts.

According to the U.S. Department of Commerce, U.S. retail sales in December of last year were flat month-on-month, with a growth rate of 0%. The consensus had called for a 0.4% increase. Core retail sales (the control group), which are used in calculating personal consumption expenditures (PCE) in gross domestic product (GDP), also fell 0.1% from the previous month.

The year-end is the peak consumption season in the United States. The fact that spending stagnated during this period is interpreted as meaning that Americans are losing the financial capacity to enjoy the holiday season. As consumption, which supports two-thirds of the U.S. economy, weakened, worries about an economic slowdown resurfaced.

As a result, expectations have grown that the Federal Reserve (Fed) could bring forward the timing of resuming interest rate cuts. According to the CME FedWatch Tool of the Chicago Mercantile Exchange (CME), the federal funds futures market has raised the implied probability of a rate cut in March to 21.6%. Late in the previous session, it had stood at 17.2%.

Against this backdrop, comments by the presidents of the Cleveland and Dallas Federal Reserve Banks suggesting that the benchmark rate could be kept unchanged for a considerable period also drew market attention.

Cleveland Fed President Beth Hammack said at an event held on the 10th (local time) in Columbus, Ohio, "Rather than trying to fine-tune the policy rate, it is better to be patient in assessing the effects of the recent rate cuts and watching how the economy evolves," adding, "In my outlook, we can hold rates steady for quite a long time."

Dallas Fed President Lorie Logan likewise said in a speech released ahead of an event in Austin, Texas, "In the coming months, I will be watching to see whether inflation moves down to target and whether the labor market remains stable," and added, "If inflation converges toward target and the labor market is stable, then the current stance of monetary policy is appropriate for achieving the Fed's dual mandate, and we may conclude that further rate cuts are not necessary."

The unexpected slowdown in consumption further heightened market focus on the nonfarm payrolls data due out on the 11th. The market expects hiring in January to slow.

Anthony Saglimbene, chief market strategist at Ameriprise Financial, said, "Another component of the challenges that the middle class and lower-income households are facing is how they feel about the employment backdrop," adding, "We know that has become a little bit more uncertain."

Saglimbene added, "If January nonfarm payrolls come in weaker than expected, that could add a bit more pressure to the prevailing mood right now."

By sector, materials, utilities, and real estate advanced. Weaker consumption weighed on large brick-and-mortar retailers Costco and Walmart, whose share prices retreated. Walmart fell 1.80%, while Costco dropped 2.64%.

Among mega-cap tech firms with a market capitalization above 1 trillion dollars, all declined except Tesla. After a steep recent slide, Alphabet's market cap has now fallen below 4 trillion dollars.

It was also notable that many financial services firms saw sharp share-price declines. Concerns grew that their business lines could be eroded after tech company Altruist launched a new artificial intelligence (AI)-based tax management tool. Charles Schwab plunged 7.4%, LPL Financial tumbled 8.3%, and Morgan Stanley and JPMorgan Chase also fell by around 2%.