georgeclerk
U.S. stocks closed lower on Thursday, while Treasury yields rose to more than two-week highs, after economic data showed strong inflation and weak consumer spending.
The S&P 500 Benchmark (SP500) fell by 0.29% close at 5,150.48 points, while the blue-chips Dow (DJI) retreated 0.35% settle at 38,905.66 points. The Nasdaq Composite, with high technological content (COMP:IND) lost 0.30% to conclude with 16,128.53 points.
Of the 11 S&P sectors, nine closed in the red. The two sectors that gained the most were energy and communication services.
Before the opening bell, the U.S. Bureau of Labor Statistics said the headline producer price index (PPI) rose +0.6% M/M in February, significantly above the consensus figure of +0.3% and accelerating compared to +0.3% in January. The core PPI, which excludes food and energy, stood at +0.3% M/M, compared to an estimate of +0.2% and moderating from the previous +0.5%. The PPI data follows a warmer-than-expected consumer price index (CPI) report earlier this week.
At the same time, the U.S. Census Bureau said retail sales rose 0.6% M/M to $700.7 billion in February, lower than the expected 0.8% increase but recovering from to -1.1% in January. Core retail sales came in at +0.3%, compared to previous consensus of +0.5% and -0.6%.
“Higher producer prices, weaker retail sales. Not a great outlook this morning,” Bespoke Investment Group summarized on X (formerly Twitter).
Both data points to sticky inflation and signs of weakness in the strength of consumer spending, indicators that the Federal Reserve probably won’t be too happy about. Market participants responded by slightly scaling back their expectations of a 25 basis point interest rate cut at the Fed’s June meeting.
Also on Thursday’s economic calendar, the number of Americans who filed for unemployment benefits last week fell to 209,000, below the estimated figure of 215,000.
“Earlier this year, the market was expecting six rate cuts and an easy landing. Now, cracks have started to appear. Growth in the consumer price index is no longer falling and has been higher than expected for two consecutive months. Even worse, crude oil prices are moving higher, with WTI moving above $80,” Leo Nelissen, part of the iREIT investment group on Alpha, told Seeking Alpha.
“After AI stocks fueled the market rally since late last year, the market is now looking for new leaders. My money continues to be in value stocks, especially in oil and gas, one of the few sectors growing on a rotation day like today,” added Nelissen.
Treasury yields rose to their highest levels since late February as traders sold bonds in reaction to the PPI data and retail sales report. The long-term 30-year yield (US30Y) rose 8 basis points to 4.43%, while the 10-year yield (US10Y) rose 10 basis points to 4.29%. The more rate-sensitive short-term 2-year yield (US2Y) rose 7 basis points to 4.69%.
See how Treasury yields have fared along the curve on the Seeking Alpha bonds page.
Turning to active stocks, Dollar General (DG) saw a reversal of fortunes, with the stock giving up early gains and finishing among the biggest losers on the S&P 500 Index (SP500). The discount retailer previously reported improved quarterly earnings and earnings. However, subsequent comments from the company’s top executive suggested that consumers were still burdened by inflation.
Dick’s Sporting Goods (DKS) rose more than 15% after the athletic equipment and apparel retailer released a strong holiday quarter report and increased its dividend by 10%.
SentinelOne (S) Class A shares fell more than 16% despite the cybersecurity company’s solid results, leading some on Wall Street to defend the company.