Stocks Mixed Amid Lackluster Economic Data, Fed Uncertainty…..

U.S. equities finished mixed, with the Financials sector leading the laggards, despite a sharp rise in Treasury yields, in the wake of mixed results from Dow member JP Morgan Chase, Citigroup, and Wells Fargo & Company. Concerns that the Fed may need to move more aggressively down the monetary policy tightening path to combat still surging inflation pressures added to the negative sentiment. Meanwhile, investors were given a dose of disappointing economic data, headlined by a sharp drop in December retail sales, a larger-than-expected deterioration in January consumer sentiment, and a dip in industrial production. The U.S. dollar gained ground, along with crude oil prices, while gold traded modestly to the downside. Europe finished lower despite a plethora of upbeat U.K. economic data, while markets in Asia also posted losses.

The Dow Jones Industrial Average fell 202 points (0.6%) to 35,912, while the S&P 500 Index nudged 4 points (0.1%) higher to 4,663, and the Nasdaq Composite gained 87 points (0.6%) to 14,894. In heavy volume, 4.3 billion shares of NYSE-listed stocks were traded, and 4.3 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.70 to $83.82 per barrel. Elsewhere, the gold spot price lost $4.60 to $1,816.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.4% to 95.16. Markets were lower for a second-straight week, as the DJIA was down 0.9%, the S&P 500 decreased 0.3%, and the Nasdaq Composite also declined 0.3%.

Advance retail sales for December fell by 1.9% month-over-month (m/m), versus the Bloomberg consensus forecast of a 0.1% dip, and compared to November’s downwardly-adjusted 0.2% rise. Last month’s sales ex-autos dropped 2.3% m/m, compared to expectations of a 0.1% gain and as November’s figure was revised lower to a 0.1% increase. Sales ex-autos and gas were down 2.5% m/m, versus estimates of a 0.2% decline, while November’s reading was adjusted down to a 0.1% gain. The control group, a figure used to calculate GDP, fell 3.1% m/m, versus projections of a flat reading, and following November’s downwardly-revised 0.5% decline.

Sales declines were broad-based, with the major contributors to the drop being at non-store retailers—which includes online activity—and department stores, while sales at home furnishings, electronics and appliances, clothing, and sporting goods stores also posted noticeable decreases.

The January preliminary University of Michigan Consumer Sentiment Index declined more than expected to 68.8, versus estimates calling for a dip to 70.0 from December’s 70.6 reading. The index hit the lowest since November as both the current conditions and the expectations components of the survey fell more than anticipated. The 1-year inflation forecast unexpectedly ticked higher to 4.9% from 4.8%, and the 5-10 year inflation forecast also rose to 3.1% from December’s 2.9% rate.

The University of Michigan said, “While the Delta and Omicron variants certainly contributed to this downward shift, the decline was also due to an escalating inflation rate. Three-quarters of consumers in early January ranked inflation, compared with unemployment, as the more serious problem facing the nation.”

The Federal Reserve’s report on industrial production showed a 0.1% m/m dip in December, versus estimates of a 0.2% rise, and compared to November’s upwardly-revised 0.7% gain. The Fed said losses for manufacturing and utilities output were mostly offset by a gain for mining production. Capacity utilization nudged lower to 76.5%, versus forecasts from the prior month’s downwardly-adjusted 76.6% rate.

The Import Price Index decreased 0.2% m/m for December, versus estimates of a 0.2% gain, and compared to November’s unrevised 0.7% increase. Versus last year, prices were up by 10.4%, compared to forecasts of a 10.8% increase and November’s unrevised 11.7% rise.Business inventories rose 1.3% m/m in November, in line with forecasts and October’s upwardly-revised increase. Business inventories have increased for sixteen-straight months.

Treasuries were lower, as the yield on the 2-year note increased 7 basis points (bps) to 0.96%, while the yields on the 10-year note and the 30-year bond rose 8 bps to 1.78% and 2.13%, respectively.

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