U.S. stocks extended declines Wednesday, following from the lowest close on Wall Street in more than a month, as investors continue to gauge the impact of China's sputtering recovery on global growth while extending bets on a soft landing for the domestic economy.
Solid retail sales for the month of July, which showed the key control group reading -- which feeds into GDP calculations -- surging 1% from the prior month, have added to hopes that consumers are weathering the Federal Reserve's aggressive rate hikes while continuing to leverage the earnings power of an historically tight labor market.
The spending rush, however, has revived concerns that the Fed may need to lift rates once more between now and the end of the year in order to keep inflation from ticking higher over the autumn months.
Minutes from the Fed's July policy meeting, in fact, showed policymakers felt inflation pressures were "unacceptably high" and could require further rate hikes in order to get closer to its 2% target.
Further signs of a recovery in the housing market added to that concern, with July housing starts rising by a faster-than-expected 3.9%, to an annualized rate of 1.452 million units, even as the Mortgage Bankers' Association said 30-year mortgage rates matched a 2001 high of 7.16% last week.
The broader economy, meanwhile, is growing at a 5.8% clip, according to the Atlanta Fed's GDPNow forecasting tool, following on from its 2.4% advance over the three months ending in June.
Rate traders see little chance of a follow-on rate hike from the Fed in September, with the CME Group's FedWatch tool indicating a 90.5% chance that rates will remain steady, with bets on a final 2023 increase pegged at 29.5% for November and 27.5% for December.
Benchmark 10-year Treasury bond yields were marked at around 4.27% in late New York trading, having touched a 2023 high of 4.274% during the Tuesday session, while 2-year notes were pegged at 4.989% following the Fed minutes.
On Wall Street, the S&P 500 was marked 29 points lower in late afternoon trading while the Dow Jones Industrial Average gained 165 points. The tech-focused Nasdaq was down 30 points.
In terms of individual stocks, Target (TGT) -) was up 2.5% after the retailer posted stronger-than-expected second-quarter earnings but slashed its full-year profit forecast as American consumers, who continue to face significant inflation pressure.
Intel (INTC) -) fell 3.6% after the chipmaker scrapped plans to buy Israel-based Tower Semiconductor, citing difficulty in obtaining approval from regulators.
Cisco Systems (CSCO) -), meanwhile, slipped 0.8% ahead of the network equipment chipmaker's fourth quarter earnings after the closing bell with investors focused on its efforts to ease supply chain bottlenecks and leverage AI technology.
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