US stocks were muted on Tuesday as investors examined the first of several key economic data releases this week in an attempt to find clues on the Federal Reserve’s interest-rate path.
The S&P 500 Index was little changed at 9:53 a.m. in New York, halting its rally. Meanwhile, the technology-heavy Nasdaq 100 Index was 0.1% lower and the Cboe Volatility Index hovered at around 17.
Retail sales unexpectedly stalled in December, Commerce Department data showed on Tuesday. The value of retail purchases, unadjusted for inflation, was little changed after a 0.6% gain in November. When broken down into categories, eight of 13 posted decreases.
While stocks and bonds rallied on the retail data news, the “reaction was muted just ahead of tomorrow’s all-important employment report for January,” said Gary Schlossberg, global strategist at Wells Fargo Investment Institute.
“The latest news on consumer spending did little to change the outlook for another rate cut by the Federal Reserve, still priced in the Fed funds futures market for the next such move at the June 17 meeting,” Schlossberg added.
The figures indicate that there was a short-lived burst of activity at the beginning of the holiday-shopping season. Households continue to be frustrated over the high cost of living and worries about the job market persist.
“Consumer spending has finally caught up with consumer sentiment, and not in a good way,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management, adding that the data shows “consumers are no longer relentlessly increasing their level of spending.”
Two other indicators that most move markets — payrolls and consumer price index — are still to come on Wednesday and Friday respectively. Initial jobless claims for the previous week will also be in focus for investors.
Concerns around artificial intelligence has been a big theme over the last few sessions, particularly as investors rotate into less risky and speculative areas of the market. Software stocks, which sold off due to fear of disruption from AI, have been on the mend.
JPMorgan Chase & Co. strategists said software stocks have the scope to rebound from the historic slide as the market is pricing in unrealistic near-term disruption from AI.
The strategists said investors should increase exposure to higher quality and AI-resilient software names as the “extreme price action” makes rotating back into the segment possible — at least in the short term.
Earnings season rolled on as Coca-Cola Co. fell after the bottom end of its full-year sales outlook came in below Wall Street expectations.
S&P Global Inc. plunged as much as 11% after the financial information services firm gave a profit forecast that failed to meet estimates. Harley-Davidson Inc. slumped after reporting an unexpected drop in motorcycle shipments.
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