Stocks finished lower Thursday, while the dollar bumped higher against its global peers amid a modest advance in Treasury bond yields as investors debated the impact of solid retail sales data on the broader inflation dynamic in the world's largest economy.
October retail sales, which indicated firm spending gain at both the headline and the core level, suggest the U.S. economy is still powering ahead in the face of the most aggressive Federal Reserve rate hikes in at least a generation.
In fact, the Atlanta Fed's GDPNow forecasting tool suggests the economy is growing at a 4.4% clip, up from a 4% estimate just a few days ago, as it heads into the the holiday spending season.
That could give the Fed cover to continue raising rates into the start of the new year, particularly given the fact that both consumer spending and job market data remain resilient. San Francisco Fed President Mary Daly said as much yesterday during an interview with CNBC in which she described rate hikes as "tightening into a strong economy" and that pause in hikes was a long way off.
James Bullard, the St. Louis Federal Reserve President, told an event in Louisville that this year's rates hikes, which have included four consecutive increases of 75 basis points in the Fed's benchmark rate, "have had only limited effects on observed inflation."
The current rate, which sits between 3.75% and 4%, is well below the "sufficiently restrictive" level the Fed needs to reduce inflation, Bullard said.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.36 higher in late New York trading at 106.64, while benchmark 2-year Treasury notes yields rose 9 basis points to 4.452%.
Data and forecasts from the corporate world offer an interesting contrast to the bullish growth thesis, with Target (TGT) warning yesterday of a 'significant shift' in spending habits from inflation-weary customers and Micron Technology unveiling plans to slash its near-term chip production plans amid a slump in global demand and a build-up in inventories.
Target's disappointing third quarter earnings rippled through the retail space yesterday, while Micron's muted outlook echoed through tech stocks in Asia overnight and again in early trading in Europe.
On Wall Street, the S&P 500 finished 0.30% lower, while the Dow Jones Industrial Average fell 7.45 points, 0.02%, to 33,546. The tech-heavy Nasdaq lost 0.35%.
Nvidia (NVDA) shares fell 1.45% even though the chipmaker posted third quarter earnings that showed solid gains in its data center business offsetting an expected slump in gaming sales.
Cisco Systems (CSCO) gained nearly 5% following a stronger-than-expected first quarter earnings report and a robust near-term outlook for the network equipment maker.
Macy's (M) shares jumped 15% after the retailer's better-than-expected third quarter earnings, as well as its holiday-season outlook
In Europe, London's FTSE 100 was marked 0.26% lower, while the pound fell to 1% to 1.1799, following a closely-watch budget statement from the U.K. finance minister Jeremy Hunt, which included big cuts to public spending, and across-the-board tax increases, amid a deepening recession and the fastest inflation in more than four decades.
Europe's region-wide Stoxx 600 was marked 0.73% lower by late-day trading in Frankfurt, following on from a tech-lead pullback in Asia, where the MSCI ex-Japan fell 1.4%.
