Data on Thursday showed that U.S. retail sales fell in the final month of the year, but spending data, a key factor in economic growth data, was higher, further complicating inflation forecasts for 2025.
Overall Commerce Department sales rose 0.4% to $729.2 billion in December, just within Wall Street’s consensus forecast of 0.6% growth. November’s data was revised to a gain of 0.8%.
The closely tracked control group, which excludes cars, building materials, office supplies, gas station sales and tobacco and is included in government GDP calculations, rose 0.7% for the month. That beat Wall Street’s consensus forecast of 0.4% and November’s 0.4% gain.
Mastercard’s closely tracked SpendingPulse report released late last month showed sales from November 1 to December 24 were up 3.8% from a year earlier, although the latest report showed five fewer shopping days than in 2023.
U.S. stocks pared gains after the data, as traders bet that solid spending data and data suggesting a more resilient labor market could further reduce bets on a rate cut by the Federal Reserve in 2025.
Brett Kenwell said: “Volatility has increased and investors are uneasy as the S&P 500 is in the throes of a 5% to 10% correction. Wednesday’s relief rally on Wall Street highlighted the extent of investor concerns, especially in Concerns over rate cuts and inflation “This is because investors are spooked by last week’s strong jobs report, despite the fact that stocks tend to do well in environments with mild inflation. “
Ultimately, we hope to see a strong job market and retail sales. This tells us that consumers are healthy and confident, two important observations in an economy where about two-thirds of gross domestic product is driven by consumer spending. “Coupled with overwhelming negative sentiment, the latest ‘good-not-great’ retail sales data may be enough to provide support for Wall Street and keep Wednesday’s gains intact.”
Andrew Caballero-Reynolds/AFP/Getty Images
Futures contracts tied to the S&P 500 opened 3 points higher, while futures contracts tied to the Dow Jones Industrial Average opened 133 points lower. The tech-heavy Nasdaq rose 50 points.
After the data was released, the benchmark 10-year bond yield edged up 2 basis points to 4.681%, and the 2-year bond yield edged up 2 basis points to 4.295%.
RELATED: Inflation data dampens key headwinds for S&P 500, Fed cuts rates
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, rose 0.04% to 106.901.
CME Group’s FedWatch said the Federal Reserve will hold interest rates steady at 4.375% at its meeting in Washington later this month. The possibility of a first rate cut this year was confirmed at the central bank’s meeting in May.
More economic analysis:
- Fed rate cut bets in 2025 tied to Trump policy wildcard
- Inflation report adds complexity to rate cut bets
- Trump’s plan will test Fed’s bets on rate cut in 2025
Earlier this week, the U.S. Commerce Department set the overall consumer price index in December at an annual rate of 2.9%, accelerating from November’s 2.7% and reaching the highest level since July.
So-called core inflation, which strips out volatile components such as food and energy, fell for the first time in six months to an annual rate of 3.2%, beating Wall Street forecasts and bringing the reading to its lowest level in more than three years.
Related: Veteran money manager issues dire warning for S&P 500 in 2025
