US stocks fell on Wednesday, after three days of gains, as strong inflation data fanned fears of faster interest rates hikes, while an unexpected fall in January retail sales raised concerns about economic growth.
The inflation data sent benchmark US 10-year Treasury yields to a session high of 2.8820 per cent, making bonds more attractive than stocks.
The Labor Department said its Consumer Price Index increased 0.5 per cent last month as households paid more for gasoline, rental accommodation and health care. Economists polled by Reuters had forecast an increase of 0.3 per cent.
Excluding the volatile food and energy components, the CPI shot up 0.3 per cent, the largest increase since January 2017.
However, the year-on-year rise in the so-called core CPI was unchanged at 1.8 per cent in January.
Separately, a report showed US retail sales decreased 0.3 per cent last month, the biggest fall in nearly a year and a surprise drop compared with economists’ expectations of a 0.2 per cent rise.
“In some ways you would say this is the worst possible number for US equities: extremely weak US retail sales and a higher CPI. I think there is less to the numbers than meets the eye, however,” Steven Englander, head of research and strategy at Rafiki Capital in New York, said.
“It does play into the fears that we are getting into a different inflation regime than we were before. The last ten years was below target inflation and now the expectations are adjusting upwards, which means the Fed is not as friendly.” By 9:34am. ET, the Dow Jones Industrial Average was down 0.29 per cent, at 24,568.22. The S&P 500 fell 0.31 per cent to 2,654.59 and the Nasdaq Composite slipped 0.29 per cent to 6,993.05.
U.S stock futures fell more than 1 per cent after the CPI data was released at 8:30am. ET. They were higher by about 0.5 per cent ahead of the report.
However, the CBOE Volatility index, which measures near-term volatility in the stock market, initially spiked after the data. The VIX is currently near sessions lows at 21.06, and well below the 50-point mark it hit last week.
Financial stocks were the only gainers among the 11 major S&P indexes. Banks benefit from higher interest rates.
Among stocks, Fossil shares soared 70 per cent as short sellers rushed to cover their positions, a day after the watchmaker posted strong holiday quarter sales.
Chipotle jumped about 15 per cent after it hired Brian Niccol from Taco Bell as its next chief executive, an move that analysts called a potentially “transformational moment.” Declining issues outnumbered advancers on the NYSE by 2,062 to 526. On the Nasdaq, 1,727 issues fell and 649 advanced.