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(Reuters) – US stocks fell on Thursday as consumer and retail stocks retreated after a sharp decline in December retail sales suggesting a slowdown in economic activity.
Retail sales fell 1.2% in the last month of 2018, said the Commerce Department, the largest decline since September 2009, as the economy emerged from a recession . Economists polled by Reuters were expecting an increase in retail sales of 0.2%.
S & P's consumer staples dropped 1.18%, the strongest among the top 10 sectors down, also hurt by a sharp decline in Coca-Cola Co. shares.
The soft drink maker fell 7% after forecasting a much lower annual profit than expected and reported a quarterly drop in volumes in North America.
The S & P retail index dropped 1.33%, Amazon.com by 1.4%, while the Home Depot Inc. and Lowe's Companies residential renovation chains fell 1 % each.
"The numbers were a bit of a downside surprise and it's essential as it's for December and this suggests that people were not spending enough on shopping for the holidays," said Randy Frederick, vice-president. President of Trading and Derivatives for Charles Schwab in Austin, Texas.
Disappointing data pushed down US Treasury yields, causing the S & P banking and financial sector to collapse by 1.8%.
The weakness in retailer data also prompted more traders to bet that the Federal Reserve would lower key rates by the end of the year. [MMT/]
The data cast a shadow over the optimism generated by the US-China trade negotiations, which have moved up to Beijing.
The White House's chief economic advisor, Larry Kudlow, gave an optimistic badessment of the talks, but said no decision had yet been taken on extending the deadline of 1 March.
Meanwhile, Congress seeks to end Thursday a border security dispute with a law that ignores President Donald Trump's request for funds to help build a border wall between the United States and Mexico.
At 9:51 am EST, the Dow Jones Industrial Average Index was down 195.24 points, or 0.76%, to 25,348.03. The S & P 500 was down 17.92 points, or 0.65%, to 2,735.11 and the Nasdaq Composite was down 32.37 points, or 0.44%, to 7,388.00.
The fourth quarter earnings season is slowly fading and about 71% of the S & P 500 companies that posted results exceeded their expectations.
But the outlook for the current quarter is less optimistic. Analysts now estimate earnings for the current quarter would fall 0.3%, which would be the first loss since the second quarter of 2016.
Cisco Systems Inc. grew 4.4% after the network gear manufacturer's forecasts surpbaded expectations, thanks to the strength of its new applications and security activities.
Falling issues outnumbered defenders for a ratio of 2.11 to 1 on the NYSE and a ratio of 1.72 to 1 on the Nasdaq.
The S & P index posted eight new highs over 52 weeks and a new low, while the Nasdaq recorded 20 new highs and 15 new lows.
(Report by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru, edited by Sriraj Kalluvila)
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