US Retail Sales Surge, Wall Street Takes a Hit!

Well, buckle up because it’s been a rollercoaster on Wall Street. The three major indices decided to paint the town red after the news hit that US retail sales went through the roof, throwing a wrench into expectations about the Federal Reserve’s monetary policy. Let’s break it down.

Red Lights on Wall Street

So, Wall Street woke up on the wrong side of the bed, with all three key indices starting the night in the red. The Dow Jones Industrial Average was down 79.27 points or 0.21%, aiming for 37,281.85. The Nasdaq Composite took a hit of 129.58 points, equivalent to 0.86%, landing at 14,814.77. Meanwhile, the S&P 500 slid 26.85 points or 0.56%, settling at 4,739.13. Ouch.

Retail Sales Surprise

Why the red vibes? Blame it on the unexpected surge in US retail sales, stealing the limelight. According to Refinitiv data as of the market open on Wednesday (January 17, 2024), these numbers caught everyone off guard, continuing the downward trend that kicked off yesterday.

In December 2023, retail sales took a leap of 0.6% month-to-month, and that’s where the plot thickens. The consensus from Reuters surveys was a more conservative estimate of just a 0.4% increase. It’s like the retail world threw a curveball, and Wall Street wasn’t ready for it.

Inflation in the Mix

Now, here’s where it gets interesting. The surge in retail sales is raising eyebrows about inflation heating up. With that in mind, market players are dialing back their expectations for a Federal Reserve interest rate cut in the upcoming March meeting. It’s like the chances dropped from a solid 60% to a shaky 55%, according to data from the FedWatch Tool CME Group.

Fed Doubts and Economic Hot Streaks

Stuart Cole, the head honcho economist at Equiti Capital in London, chimed in on the situation. He mentioned that the sizzling economic data releases are sowing doubts about the Fed’s plans. According to Cole, “For the Fed, these numbers will create further doubt about the possibility of the first rate cut in March, the likelihood of a cut is decreasing with each data release we get.”

Bond Yields Do the Tango

After the retail sales bombshell, the yield on the 10-year US Treasury bonds spiked to over 4%, showing that investors are ditching these bonds because their prices are taking a nosedive. It’s like the market is doing the tango, and bonds are being left on the dance floor.

Dollar’s Power Play

As investors ditch bonds, the US dollar is flexing its muscles. The US Dollar Index (DXY) was up nearly 1% at the close on Tuesday, and as of 9:51 PM (WIB) tonight, it’s still climbing, reaching 103.61, up 0.26%. A stronger dollar has a way of putting the squeeze on the stock market, and we’re seeing big-cap stocks like Alphabet (GOOG) down by 0.6%, and both Amazon (AMZN) and the company behind Instagram (META) down by 0.9%.

So, there you have it – a wild night on Wall Street sparked by some unexpected retail therapy. The market’s feeling the heat, and it’s clear that everyone is reevaluating their expectations for the Fed’s next move. Stay tuned for more twists and turns in this financial drama.