Wall St set to open lower as strong retail sales data adds to rate hike fears

By Johann M Cherian and Sruthi Shankar

(Reuters) – Wall Street was set to open lower on Wednesday after stronger-than-expected retail sales data underscored a resilient U.S. economy, which could offer more room for the Federal Reserve to raise interest rates.

A Commerce Department report showed retail sales surged 3% in January, driven by purchases of motor vehicles and other goods. Economists polled by Reuters had forecast sales would increase by 1.8%.

“These numbers (retail sales) beat consensus by a long shot and it just shows that the consumer is still in a good spot,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“As a result of that, you see the yields are backing up and the dollar is strengthening. Obviously, if this trend continues, it just reinforces the notion that the Fed is going to continue to raise rates.”

The benchmark S&P 500 came under pressure on Tuesday after data showed U.S. consumer prices accelerated in January, boosting expectations that the U.S. central bank will raise the policy rate at least twice more this year to the 5-5.25% range.

A rally this year in U.S. stocks came to a halt last week as hawkish comments from Fed policymakers pushed investors away from riskier assets such as equities.

Still, the S&P 500 is up 7.7% so far this year after a 19.4% slump in 2022 as investors snapped up battered growth stocks, while a better-than-expected earnings season added to the cheer.

Of the more than half of the S&P 500 firms that have reported results so far, nearly 70% have topped profit expectations, as per Refinitiv data. 

At 8:51 a.m. ET, Dow e-minis were down 82 points, or 0.24%, S&P 500 e-minis were down 11.25 points, or 0.27%, and Nasdaq 100 e-minis were down 25.5 points, or 0.2%.

U.S.-listed shares of Taiwan Semiconductor Manufacturing Co (TSMC) fell 5.8% in premarket trading after Warren Buffett’s Berkshire Hathaway Inc slashed its stake in the chipmaker.

Shares of Airbnb Inc and Tripadvisor Inc jumped more than 9% each after the companies posted forecast-beating results due to strong demand for travel.

Devon Energy fell 7.4% after the shale oil producer missed Wall Street estimates for fourth-quarter profit due to a hit to production from severe cold weather in the United States and higher expenses.

Kraft Heinz inched up 0.3% after the ketchup maker beat quarterly sales estimates, helped by demand for its packaged meals and condiments, despite high prices.

(Reporting by Johann M Cherian and Sruthi Shankar in Bengaluru; additional reporting by Shristi Achar A, Editing by Savio D’Souza and Anil D’Silva)