Markets hover near record levels following soft economic data from the U.S.
U.S. stocks are drifting around their record heights Friday following the latest report on the economy to come in surprisingly weak, this time about how much shoppers are spending at retailers. Such data could keep interest rates low, which is something Wall Street loves, but it also raises the risk of a worst-case economic scenario of slow growth and high inflation.
The S&P 500 edged up by 0.1%, coming off its all-time high set the day before. The Dow Jones Industrial Average was down 27 points, or 0.1%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.1% higher.
Treasury yields also held relatively steady in the bond market after a report showed shoppers spent less at U.S. retailers last month than the month before. That surprised economists, who were forecasting another month of growth.
On the bright side for financial markets, such a pullback in spending could take pressure off inflation. Inflation remains much higher than anyone would like, but reports earlier this week suggested the pace of increases in prices is decelerating.
That in turn could encourage the Federal Reserve to hold off on hikes to interest rates. Higher rates would help keep a lid on inflation, but they do so by intentionally slowing the economy and making it more expensive for everyone to borrow money.
But the downside of such data, including last week’s surprsingly weak report on the U.S. job market, also raises the risk of a slowing economy. The Fed has no good tool to fix both a stagnating economy and high inflation at the same time, which is why what’s called “stagflation” is seen as a worst-case scenario.
Some on Wall Street cautioned against overreacting to the weak data on U.S. retail sales, even if it was broad based. It could simply be a snap back after retail sales in earlier months were boosted by unusual factors such as big tax refunds, the World Cup and even an earlier Prime Day event at Amazon, according to Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute.
Shorter-term Treasury yields eased following the retail sales report, suggesting traders see the Fed as less likely to hike interest rates at its next meeting in September.
But the yield on the 10-year Treasury, which moves more on expectations for inflation and economic growth in upcoming years, rose to 4.65% from 4.63% late Thursday.
On Wall Street, Reddit jumped 14.7% after learning it will join the S&P 500 index on Tuesday. Many professional investors and funds closely track the index, either mimicking it or at least measuring their performance against it. That can push many investors to buy a stock automatically when it enters the index.
Applied Materials fell 4% even though the company, whose technology helps make semiconductors, reported stronger profit and revenue for the latest quarter than analysts expected. CEO Gary Dickerson said global hunger for artificial-intelligence technology helped it deliver another record quarter.
But its stock had already more than doubled this year and built expectations very high, which helped pressure the stock on Friday.
AI stocks in general have been swinging sharply on worries that their prices shot too high because of AI euphoria and that their strong growth in revenue may not be sustainable.
In the oil market, prices were relatively steady following their big recent swings as hopes rose and fell about when the war with Iran will allow tankers to carry crude again from the Middle East again to customers worldwide.
The price for a barrel of Brent crude slipped 0.2% to $86.92.
In stock markets abroad, indexes were mixed in Europe and Asia.
London’s FTSE 100 slipped 0.1% after Nigel Farage regained the seat in Parliament he quit a month ago, beating trash-can wearing comic candidate Count Binface in a special election.
South Korea’s Kospi again had one of the world’s sharpest moves and jumped 2.4% for its third straight gain of at least that much. Seoul has been at the center of the world’s swings for artificial-intelligence stocks because its market is dominated by two tech giants, Samsung Electronics and SK Hynix.
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AP Business Writers Michelle Chapman and Elaine Kurtenbach contributed to this report.
This article was first reported by AP
