S&P 500, Dow climb as retail sales data cheers

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 14, 2024. REUTERS/Brendan McDermid

By Johann M Cherian and Ankika Biswas

(Reuters) – The S&P 500 and the Dow gained on Thursday as investors cheered a higher-than-expected fall in retail sales data and looked ahead for clues on when the U.S. Federal Reserve would deliver its first interest-rate cut this year.

A Commerce Department report showed U.S. retail sales dropped 0.8% in January, weighed by declines in receipts at auto dealerships and gasoline service stations.

Bets for an at least 25-basis-point rate cut in May edged up to 40.6%, while odds for June stood at 82%, according to the CME Group’s FedWatch Tool.

“After several months of strong retail sales figures, January’s results were well below expectations. Investors were expecting modest growth in core retail sales, but instead saw a month-over-month decline,” said Bret Kenwell, U.S. investment analyst at eToro.

“This complicates things for investors looking for clarity around the Fed’s first rate cut.”

On the other hand, a Labor Department report showed initial claims for state unemployment benefits stood at 212,000 for the week ended Feb. 10, versus the estimated 220,000 figure.

The data sets follow a warmer-than-expected inflation report that heightened uncertainty about the timing of the Fed’s rate cuts this year. However, investors found relief when policymakers said price pressures were still moderating, although the path to the 2% target could be bumpy.

Wall Street had regained some lost ground on Wednesday following an inflation-induced malaise, with the S&P 500 closing above the psychological 5,000-point mark for the third time this month.

Comments from Fed Governor Christopher Waller and Atlanta Fed President Raphael Bostic, due in the day, will be scrutinized for their perspectives on the monetary policy easing outlook.

At 9:52 a.m. ET, the Dow Jones Industrial Average was up 184.34 points, or 0.48%, at 38,608.61, the S&P 500 was up 14.75 points, or 0.29%, at 5,015.37, and the Nasdaq Composite was up 7.69 points, or 0.05%, at 15,866.83.

Weighing on the tech-heavy Nasdaq, Alphabet dropped 2.8% after investment firm Third Point dissolved its stake in the megacap.

Apple, too, slipped 0.9% after Berkshire Hathaway trimmed its large stake in the iPhone-maker and Soros Fund Management dissolved its stake in the company.

Investor optimism was also buoyed by a robust season that saw 80.3% of S&P 500 companies beating earnings expectations, LSEG data showed, surpassing the annual 76% average.

Cisco Systems shed 2.5% as it planned to cut 5% of its global workforce and lowered its annual revenue target to navigate a tough economy.

CBRE Group jumped 8.4% after forecasting annual profit largely above estimates, driving a 2.1% rise in the S&P 500 real estate sector.

Deere & Co, the world’s largest farm-equipment maker, lost 4.5% after cutting its 2024 profit forecast, while West Pharmaceutical Services tumbled 20% after forecasting full-year results below estimates.

SoundHound AI jumped 52%, while Arm climbed 2.6% after Nvidia disclosed stakes in both AI-related firms.

Advancing issues outnumbered decliners by a 5.23-to-1 ratio on the NYSE and a 2.70-to-1 ratio on the Nasdaq.

The S&P index recorded 50 new 52-week highs and one new low, while the Nasdaq recorded 83 new highs and 26 new lows.

(Reporting by Johann M Cherian in Bengaluru; Editing by Pooja Desai)