Unexpected U.S. retail sales decrease hits stocks

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  • Dow Jones Industrial Average down 0.1%
  • S&P 500 falls by 0.27%
  • Nasdaq up 0.09%

The Dow Jones Industrial Average traded lower yesterday after earlier gains linked to trade talks progress between Washington and Beijing. The drop is being attributed to the release of U.S. retail sales figures for December that saw the biggest drop since September 2009.

The Commerce Department said that retail sales dropped by 1.2% in December last year; analysts had predicted that the figures would show an increase of 0.2%.

Consumer spending makes up around two-thirds of GDP growth in the U.S. Although the 35-day government shutdown undoubtedly had an impact on the month’s figures, they are still being seen as an indication of weakness in the country’s economic health.

Some observers were shocked, as Pantheon Economics’ Ian Shepherdson explained: “These numbers are astonishing, and impossible to square with the Redbook chain store sales survey, which reported surging sales in December and a record high in the week of Christmas, on the back of the plunge in gasoline prices.”

“These data are so wild that we have to expect hefty upward revisions, but if they stand, they are very unlikely to be representative of the trend over the next few months,” added Shepherdson. “The consumer is no longer enjoying tax cuts or falling gas prices, but that’s no reason to expect a rollover.”

Most of the markets reacted with drops, as the Dow Jones Industrial Average dropped 0.41% to 25,439, the S&P 500 fell by 0.27%, but the Nasdaq rose 0.09%.

Previously, potentially positive news regarding trade talks between the U.S. and China had given investors renewed confidence. U.S. Treasury Secretary Steven Mnuchin said he was “looking forward to discussions” on Thursday when he spoke to reporters in Beijing ahead of meetings with China’s Vice Premier Liu He.

Brian Ducey

Brian graduated from Chaminade High School and the University Of Vermont Kalkin School Of Business with a concentration in Finance. He began his career with Knight Capital Markets, working his way to market maker. Brian later expanded his market repertoire, working with various sell-side research brokerage firms, such as Sidoti & Co., and William O’Neill & Co., as an Account Executive. With over 20 years-experience in the financial industry, Brian has built a unique perspective into “market intelligence” understanding an ability to read the tape and apply second level thinking in a fast paced environment. Brian also carried several market licenses, including the series 7, 24, 55, 65, and 63 licenses as well as previously passing The Connecticut Life and Health Insurance Exam