US stocks fell on Wednesday after the government’s monthly retail sales report showed a slowdown in consumer spending activity, while wholesale inflation data showed a cooling in prices.
Wall Street also continued to analyze corporate financial updates for signs of an “earnings recession” that many analysts have warned of.
The S&P 500 (^GSPC) fell 1.6% after reversing gains from earlier in the day, while the Dow Jones Industrial Average (^DJI) lost 600 points, or 1.2%. The tech-heavy Nasdaq Composite ( ^IXIC ) fell 1.2%. The Dow had its worst day of 2023, while Nasdaq losses snapped a seven-day winning streak.
Wall Street navigated a slew of data, corporate earnings signals and Fedspeak on Wednesday. St. Louis Federal Reserve President James Bullard said Wednesday that he and his colleagues must move interest rates above 5 percent “as quickly as possible” to rein in inflation before halting the current hike cycle.
“Why don’t we go where we need to go?” he told Nick Timiraos of the Wall Street Journal in a live Q&A event. “Why should I stop?”
Meanwhile, Federal Reserve Chairman Jerome Powell has tested positive for COVID-19 and is experiencing mild symptoms.
“Chairman Powell is keeping up with the COVID-19 vaccines and boosters,” the Fed said in a statement. “Following guidelines from the Centers for Disease Control and Prevention, he is working remotely while isolating at home.”
As for economic data, the Commerce Department said on Wednesday that US retail sales fell 1.1% last month, while November’s reading was also revised downward. Economists had expected a 0.8% decline in December.
Meanwhile, the producer price index (PPI), which measures inflation at the wholesale level, fell 0.5% last month – the biggest drop since the pandemic began. The core PPI rose at an annual clip of 6.2%, significantly lower than the annual reading of 7.3% in November. The print comes a week after the Consumer Price Index (CPI) showed a slight slowdown in inflation to a lower 6.5%.
The story continues
NEW YORK, NEW YORK – JANUARY 17: Traders work on the floor of the New York Stock Exchange during morning trading. (Photo by Michael M. Santiago/Getty Images)
In corporate news, Microsoft ( MSFT ) said Wednesday it is cutting 10,000 jobs as part of a cost-cutting effort. The layoffs affect approximately 4.5 percent of the company’s total of 221,000 employees. Microsoft shares closed up 1.9%.
Shares of PNC Financial ( PNC ) fell 6% after the bank’s quarterly results showed a $408 million provision for loan losses — or rain-day funds in case an economic downturn causes consumers to default on loans .
Shares of United Airlines ( UAL ) fell 5% after rising earlier in the session, despite the company reporting better-than-expected earnings for the final three months of 2022 and an upbeat outlook for the new year.
Shares of International Business Machines Corporation (IBM) fell 3.3% after being downgraded by Morgan Stanley to Equal-Weight from Overweight.
Shares of Moderna ( MRNA ) rose more than 3% after the biotech company said results from a late-stage clinical trial for its RSV vaccine were effective and that it would seek approval for the injection from the Food and Drug Administration by mid per year.
Investors are heading into the middle of what is likely to be a challenging fourth-quarter earnings season. Analysts revised down their revenue growth forecasts. The S&P 500 is forecast to post a 3.9% annual decline in earnings for the fourth quarter, according to data from FactSet Research — the first annual decline in earnings reported by the index since late 2020, if it materializes.
DataTrek’s Nicholas Collas notes that while the short-term declines in the S&P’s sequential earnings resemble those that have preceded the past four recessions, there is insufficient evidence at this point to support an economic downturn or a significant decline in corporate performance.
“What we don’t have yet is visibility into the catalyst that will drive the next set of bigger negative quarterly comparisons,” Collas said.
“Yes, last year’s aggressive Fed monetary policy could still bite the US economy in 2023 and reduce corporate earnings,” he added. “However, there are currently insufficient economic data points to make a solid case for a recession in 2023 and/or significantly lower corporate earnings.”
Investors also watched for a crucial move by the central bank abroad early on Wednesday. The Bank of Japan kept its monetary policy unchanged, keeping interest rates extremely low and capping its bond yields, contrary to market expectations. The yen fell against the dollar after the result.
In commodity markets, oil snapped a recent streak of gains. West Texas Intermediate (WTI) futures fell 1.2% to near $79 a barrel.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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