US stocks are drifting around their record heights following the latest report on the economy to come in surprisingly weak, this time about how much shoppers are spending at retailers. The S&P 500 was virtually unchanged, coming off its all-time high set the day before. The Dow Jones Industrial Average was down 24 points, or less than 0.1%, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.2% lower.
Economic Impact
Treasury yields were also mixed in the bond market after a report showed shoppers spent less at US retailers last month than the month before. That surprised economists, who were forecasting another month of growth. On the bright side for financial markets, such a pullback in spending could take pressure off inflation. Inflation remains much higher than anyone would like, but reports earlier this week suggested the pace of increases in prices is decelerating.
If inflation keeps trending that way, it could encourage the Federal Reserve to hold off on hikes to interest rates. Higher rates would help keep a lid on inflation, but they do so by intentionally slowing the economy and making it more expensive for everyone to borrow money. But the downside of such data, including last week’s surprisingly weak report on the US job market, is that they also raise the risk of a slowing economy.
Market Reaction
Some on Wall Street cautioned against overreacting to the weak data on US retail sales, even if it was broad based. It could simply be a snap back after retail sales in earlier months were boosted by unusual factors such as big tax refunds, the World Cup and even an earlier Prime Day event at Amazon, according to Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute.
US consumers nevertheless appear to be getting more discouraged about the economy. A preliminary survey by the University of Michigan suggested sentiment among them is weakening by more than economists expected. The survey said drops occurred across the political spectrum and showed up particularly among older, lower-income and other groups who can be hurt most by inflation.
Original reporting: WTVQ (Lexington) — read the source article.
