Wall Street mixed as retail sales point to more rate hikes

By Johann M Cherian and Noel Randewich

A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City

© Thomson Reuters
A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City

(Reuters) – Wall Street was mixed on Wednesday after stronger-than-expected retail sales data offered evidence of resilience in the U.S. economy, while also fueling expectations of more interest rate hikes by Federal Reserve in the months ahead.

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 estimated a sales would increase by 1.8%.

That follows data on Tuesday showing 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.

“The good news from retail, and broadly from the stronger economy, has been mostly priced in,” said Ross Mayfield, an investment strategist at Baird in Louisville, Kentucky. “At the same time, that strength has taken market expectations of rate cuts off the table and moved the terminal Fed funds rate a little bit higher.”

Fueled by a rebound in growth stocks that were hammered in last year’s stock market downturn, the S&P 500 has climbed almost 8% so far in 2023. A better than expected quarterly earnings season has provided cautious optimism.

More than half of the S&P 500 firms have reported earnings so far, and nearly 70% of those have topped profit expectations, as per Refinitiv data. That compares to a long-term average of 66%.

In afternoon trading, the S&P 500 was down 0.12% at 4,131.37 points.

The Nasdaq gained 0.32% to 11,998.09 points, while the Dow Jones Industrial Average was down 0.26% at 34,001.65 points.

Of the 11 S&P 500 sector indexes, six declined, led lower by energy, down 2.05%, followed by a 0.5% loss in health care.

Tesla rose 1.5% with $28 billion worth of the electric car maker’s shares exchanged, equivalent to almost a quarter of all trading in S&P 500 stocks.

Roblox soared 25% after the gaming platform popular with kids topped quarterly bookings estimates.

U.S.-listed shares of Taiwan Semiconductor Manufacturing Co (TSMC) fell 5.6% after Warren Buffett’s Berkshire Hathaway Inc slashed its stake in the chipmaker.

Shares of Airbnb Inc and Tripadvisor Inc rose 14% and 1.6%, respectively, after the companies posted forecast-beating results due to strong travel demand.

Devon Energy slumped almost 12% after the shale oil producer missed expectations for quarterly profit due to a hit to production from severe cold weather in the United States and higher expenses.

Advancing issues outnumbered falling ones within the S&P 500 by a 1.1-to-one ratio.

The S&P 500 posted 14 new highs and no new lows; the Nasdaq recorded 52 new highs and 45 new lows.

(This story has been refiled to add the dropped word ‘Street’ in the headline)

(Reporting by Johann M Cherian and Sruthi Shankar in Bengaluru and by Noel Randewich in Oakland, Calif., additional reporting by Shristi Achar A; Editing by Savio D’Souza, Anil D’Silva and David Gregorio)