US stocks fall amid mixed messages on consumer and manufacturing data

U.S. stocks fell on Wednesday as investors digested warmer-than-expected retail sales data and slowing manufacturing output growth in the world’s largest economy.

Wall Street’s benchmark S&P 500 fell 0.8%, while the tech-heavy Nasdaq Composite fell 1.5%. The dollar index, which tracks the currency against six of its peers, fell 0.1% and fell 4.7% in November.

Data released on Wednesday showed U.S. retail sales rose more than expected in October, rising 1.3%, after stabilizing in September. Economists polled by Reuters had forecast a 1% rise.

The sales figures came after department store Target warned of weakening consumer demand and announced a multibillion-dollar cost-cutting plan, with its shares plunging 13% on Wednesday.

“Dwindling savings and increased use of credit is keeping the consumer supported right now,” said Shelby McFaddin, an analyst at Motley Fool Asset Management. Total household debt rose 2.2% to $16.5 billion in the third quarter, according to data from the Federal Reserve Bank of New York.

Another batch of data released on Wednesday showed U.S. manufacturing output rose 0.1% in October, slightly less than the 0.2% increase predicted by economists. U.S. industrial output, which includes mining output and utilities in addition to manufacturing output, fell 0.1%. Economists were forecasting a 0.2% rise.

The numbers suggest that the US manufacturing sector is “slowly succumbing to the global malaise”, said Paul Ashworth, chief economist for North America at Capital Economics.

In government bond markets, the yield on the two-year Treasury note, which is particularly sensitive to interest rate expectations, remained stable at 4.36%. The yield on the benchmark US 10-year note fell 0.11 percentage points to 3.68%. Yields fall when prices rise.

US stocks rose in the previous session, consolidating strong gains at the end of last week, after a report on Tuesday showed factory gate prices rose 0.2% in October. compared to September, less than the 0.4% rise expected by economists polled by Bloomberg. The data raised hopes that moderating inflation could prompt the Federal Reserve to slow the pace of interest rate hikes soon.

Across the Atlantic, the regional Stoxx Europe 600 fell 1%. London’s FTSE fell 0.3% after new data showed UK inflation accelerated to 11.1% last month from 10.1% in September. Core inflation, which excludes volatile food and energy prices, held steady at 6.5% in October, the same rate as in September.

“It looks like headline inflation in the UK is at its peak,” said James Smith, an economist at ING.

“The fact that the government is actually fixing the electricity [and] gas unit prices below wholesale costs until next April means that it is probably as high as possible, although we expect general prices to remain in the double digits until February of the year next at least,” Smith added.

Asian stocks fell on Wednesday after making strong gains earlier this week as geopolitical tensions in Europe and rising Covid-19 cases in China hit markets.

Hong Kong’s Hang Seng Index fell 0.5%, China’s CSI 300 fell 0.8% and South Korea’s Kospi fell 0.1%. Japan’s Topix was little changed.

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