US equity indexes fell after data showed that US retail sales in January jumped by the most in almost two years.
(Bloomberg) — US equity indexes fell after data showed that US retail sales in January jumped by the most in almost two years.
The 3% month-over-month gain suggested that strong consumer spending will keep prices elevated, which could increase pressure on the Federal Reserve to step up its efforts to tamp down inflation. And US homebuilder sentiment increased in February by the most since mid-2020, as easing mortgage rates over the past several months have boosted the housing market.
“The biggest concern that we’re going to have when we go forward here is the uncomfortable question of maybe the Fed is not as sufficiently restrictive,” said Jim Bianco, founder of Bianco Research, said on Bloomberg TV. “The assumption behind all the recession calls at the beginning of the year was we’ve raised rates a lot, that’s got to hurt. But maybe it doesn’t. Maybe all we’ve done is gone to neutral and that’s what the market’s starting to sniff out.”
Investors were still mulling Tuesday’s US consumer price index data and what it means for the US economy.
“The Fed will read recent activity reports as supporting plans for additional interest rate increases in the first half of this year,” Bill Adams, chief economist at Comerica Bank, wrote. “Even so, the economy is generally performing better than expected so far in 2023, and inflation’s decline slowed at the turn of the year, too.”
“Yesterday’s CPI report for January showed inflation continuing to moderate but slowly,” wrote Ed Yardeni, founder of his namesake research firm. “The new information isn’t likely to moderate Fed officials’ hawkishness, though, and doesn’t much change the economic outlook. We continue to see a soft landing with disinflation as the Fed continues to raise the federal funds rate to 5.10%, then keeps it there through year-end.”
The energy sector was the biggest drag on the S&P Wednesday. Oil futures dropped below $78 a barrel after EIA reported crude inventories rose over 16 million barrels last week. Devon Energy Corp. sank as much as 11% after fourth-quarter earnings missed estimates.
The pound weakened as UK inflation fell more than expected in January and European stocks gained. Barclays Plc slumped as much as 10% after the bank’s earnings missed estimates.
Bitcoin rallied for a second day, approaching the $23,000 level and spurred gains in cryptocurrency-exposed stocks.
Key events:
- US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday
- France CPI, Russia GDP Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.5%, more than any closing loss since Feb. 9 as of 10:51 a.m. New York time
- The Nasdaq 100 fell 0.5%
- The Dow Jones Industrial Average fell 0.5%, more than any closing loss since Feb. 9
- The Stoxx Europe 600 rose 0.3% to the highest in about a year
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.8%, more than any closing gain since Feb. 3
- The euro slipped 0.7%, more than any closing loss since Feb. 3
- The British pound slipped 1.5%, more than any closing loss since Dec. 15
- The Japanese yen slipped 0.8%, more than any closing loss since Feb. 6
Cryptocurrencies
- Bitcoin rose 2.3% to $22,761.44
- Ether rose 1.4% to $1,577.77
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.79%
- Germany’s 10-year yield advanced four basis points to 2.47%
- Britain’s 10-year yield declined seven basis points, more than any closing decline since Feb. 2
Commodities
- West Texas Intermediate crude fell 1.4% to $77.92 a barrel
- Gold futures fell 1.2%, the most since Feb. 3
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.