(Reuters) – U.S. stocks fell on Thursday, led by declines in consumer and bank shares, after bleak retail data fanned concerns about retailer earnings and led to increased bets of interest rate cuts, with losses capped by optimism over Sino-U.S. trade talks.
Retail sales tumbled 1.2 percent in December, the commerce department said, the largest drop since September 2009 when the economy was emerging from a recession. Economists polled by Reuters had expected an increase of 0.2 percent.
The disappointing data came ahead of earnings from big box retailers such as Walmart Inc next week, and PepsiCo Inc due on Friday.
Coca-Cola Co tumbled 7.6 percent after the world’s largest beverage company forecast slowing sales in 2019 and lower demand for its fizzy sodas in some markets.
The drop weighed on the S&P consumer staples, which declined 0.74 percent. The S&P retailing index fell 0.74 percent, dragged down by drops in Amazon.com and Home Depot.
“Today is a combination of data which shows the U.S. consumer may not be as strong as we thought and whether inflation is actually running a little hotter than expected,” said Yousef Abbasi, global market strategist at INTL FCStone in New York.
“Investors are still very much focused on the credibility of getting a China deal,” Abbasi said.
As the U.S.-China trade talks entered a higher level in Beijing, investors were seeking clarity. Top White House economic adviser Larry Kudlow gave an upbeat assessment on the talks, while Bloomberg reported that the negotiating teams were far apart on reform demands.
The weak data also pulled U.S. Treasury yields lower, sending financials down 1.3 percent. [US/]
Federal funds futures implied traders saw about a 15 percent probability the U.S. central bank would lower overnight interbank borrowing costs by a quarter point, up from 7 percent late on Wednesday. [MMT/]
Meanwhile, the U.S. Congress is looking to end a dispute over border security on Thursday with legislation that would ignore President Donald Trump’s request for funds to help build a border wall.
At 11:09 a.m. ET, the Dow Jones Industrial Average was down 139.14 points, or 0.54 percent, at 25,404.13. The S&P 500 was down 11.99 points, or 0.44 percent, at 2,741.04 and the Nasdaq Composite was down 12.38 points, or 0.17 percent, at 7,408.00.
The technology sector was flat, but chipmakers, which get a large portion of their revenue from China gained. The Philadelphia Chip rose 0.11 percent.
Cisco Systems Inc rose 3.1 percent after the network gear maker’s earnings beat estimates, driven by strength in its newer applications and security businesses.
Declining issues outnumbered advancers for a 1.22-to-1 ratio on the NYSE and a 1.14-to-1 ratio on the Nasdaq.
The S&P index recorded 13 new 52-week highs and one new lows, while the Nasdaq recorded 39 new highs and 20 new lows.
(Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila)