Wall Street opens lower despite surge in retail sales

The main indices on Wall Street opened on the back foot on Wednesday despite a surge in US retail sales in January.

Shortly after the opening bell, the Dow Jones Industrial Average was down 0.37% at 31,407 while the S&P 500 dropped 0.61% to 3,908 and the Nasdaq fell 0.99% to 13,908.

The slide came even as US retail sales surged 5.3% in Janaury compared to estimates of a 1% rise, although December’s figure was revised to show a slightly bigger fall than originally reported, down 1% rather than 0.7%.

However, the sharp pick-up follows a $900bn stimulus programme approved by the US government at the end of December, which means $600 cheques winging their way to mostly low-income and some middle-income families which may have provided a short-term boost that may not be repeated until a round of US$1,400 cheques arrives as part of a recently proposed US$1.9trn package.

Meanwhile, signs of inflation also emerged with the January producer prices index, up 1.3% month on month compared to 0.3% in December and forecasts of a 0.4% rise.

7:55am: Wall Street to start mostly flat 

After ending higher on Tuesday, Wall Street is expected to open fairly flat despite concerns about inflation beginning to weigh.

The Dow Jones Industrial Average is forecast to edge slightly lower at 31,485 while the S&P 500 is likely to be virtually unchanged at 3927 and the Nasdaq is also predicted to slip a little.

US mortgage applications were down 5% last week, with buyers said to be put off by rising rates. Later come January retail sales figures which are forecast to show a rebound after sharp falls in the previous two months. With a consumer slowdown and the political deadlock over a proposed stimulus package, retail sales fell by 1.1% month on month in November and 0.7% in December. A rise of 1% is now expected for January.

Michael Hewson at CMC Markets said: “Since [November and December] the economic data has picked up markedly, helped in some part by the new $900bn stimulus plan that was agreed at the end of last year, and expectations over another $1.9trn later this quarter. This optimism is likely to translate into a rebound in consumer confidence and ergo a possible rebound in consumer spending, after a disappointing Thanksgiving and Christmas spending period. Expectations are for a 1% recovery to start the year, which could well continue into the rest of the first quarter.”

US producer prices and the minutes of the last Federal Reserve meeting will also be scrutinised for signs of inflation, especially after the higher than expected UK figure.

Four things to watch for on Wednesday:

• Highlights in the earnings diary today include e-commerce group Shopify Inc (NYSE:SHOP), semiconductor maker Analog Devices Inc (NASDAQ:ADI) and automation specialist Synopsys Inc (NASDAQ:SNPS)
• Meanwhile, shares in eBay Inc (NASDAQ:EBAY) may be in focus following reports that the UK’s Competition and Markets Authority has objected to the firm’s sales of a major segment of its business to Norwegian peer Adevinta
• Amazon Inc (NASDAQ:AMZN) is facing its own set of legal troubles after the state of New York filed a lawsuit against the corporation accusing it of failing to protect workers from the coronavirus
• On the macro front, aside from the Fed minutes, investors will be keeping an eye on the latest set of US retail sales data as well as the NAHB housing market index for February and industrial production figures for January

Story by ProactiveInvestors