Wall Street’s major averages on Tuesday fluctuated, as hotter-than-expected retail sales numbers along with soaring Treasury yields put pressure on equities.
All three indexes opened to the downside and quickly hit session lows before reversing course to trade higher. They have since steadily given up those slight gains to slip back into negative territory.
By late afternoon, the Nasdaq Composite (COMP.IND) had slipped 0.49% to 13,501.55 points. A slide in Nvidia (NVDA) weighed on the tech-heavy index, after the U.S. imposed curbs on sales of chips made by the company to China.
Of the 11 S&P sectors, six were in the red, led by Technology. Energy topped the gainers.
Earlier, September retail sales came in at +0.7% M/M, surging past the consensus figure of +0.3% and just slightly lower than the prior month’s reading of +0.8%. Strong spending by consumers tends to keep prices elevated, which in turn would mean the Federal Reserve would have to keep rates higher for longer.
“Consumer resilience remains intact; that’s the takeaway from this report … Continued consumer resilience could keep pressure on inflation and thus the Fed, but we still view the balance of risks becoming more balanced as far as the Fed’s concerned. Another rate hike before the end of the year is a possibility, but our base case remains that the last rate hike of the tightening cycle occurred in July,” Wells Fargo’s Tim Quinlan said.
Treasury yields jumped after the retail sales report, as market participants sold-off bonds. The longer-end 10-year yield (US10Y) soared to a session high of 4.86%, its highest level since 2007. The 30-year yield (US30Y) was up 9 basis points to 4.95%, while the more rate-sensitive shorter-end 2-year yield (US2Y) was up 13 basis points to 5.23%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
“Amid high inflation, increased Treasury supply, and a tight labor market, duration is not appealing. 10-year yields might test and break above 5% before November’s FOMC meeting,” Althea Spinozzi, senior fixed income strategist at Saxo Bank, said on X (formerly Twitter).
Tuesday’s economic calendar also saw September U.S. industrial production coming in at +0.3% versus an expected figure of +0.1%. Furthermore, business inventories rose slightly more than anticipated in August. Finally, NAHB homebuilder sentiment continued to slide in October.
Moreover, several Fed officials were scheduled to speak today. Governor Michelle Bowman at a roundtable focused on digital assets. Richmond Fed President Tom Barkin at another roundtable said that the path for inflation wasn’t yet clear. Minneapolis Fed President Neel Kashkari will talk later in the day.
A busy day also saw quarterly results from some major names. Bank of America (BAC) and Goldman Sachs (GS) put in a mixed performance. Healthcare giant Johnson & Johnson (JNJ), reporting its first earnings since separating its consumer business Kenvue (KVUE), saw strength in its pharma segment. United Airlines (UAL) will announce numbers after the closing bell.
Additionally, traders were keeping an eye on the ongoing conflict between Israel and Hamas. WTI crude oil futures (CL1:COM) were on track to add to their losses from the prior session amid no major developments since Israel’s forces sent an evacuation notice to Gaza residents on Friday.