Strong US retail sales push back on cuts

US stocks end lower as data continues to shatter rate cut expectations

By Nadia Elbilassy | @Nadia Elbilassy | 18 January 2024

Market close
  • Stocks closed in the red amid diminishing calls for early rate cuts, a strengthening dollar, and key economic indicators signaling resilience in the labor market and a surge in U.S. retail sales.

  • The VIX rose above 14.5 after VIX options expired, with future movements tied to uncertainties surrounding potential rate cuts by the Federal Reserve.

  • S&P 500 hit overnight lows at 4,713, Dow Jones dropped to 37,101, and Nasdaq declined to 16,551.

On the Market Watch!

Stocks ended the day in negative territory as key data continues to diminish the need for early rate cuts accompanied by a strengthening dollar. Key economic indicators have proven that it maybe still too early to cut rates starting March, as inflation gets hotter in December, Labor market continues to show resilience and as December data witnessed a more significant-than-anticipated surge in U.S. retail sales, propelled by heightened activity in motor vehicle and online purchases.

Overnight, the VIX surpassed the 14.5 level following the expiration of VIX options. The future trajectory of the VIX hinges largely on where the Federal Reserve is likely to implement multiple rate cuts between now and January 2025 will also play a crucial role.

Various Federal Reserve members delivered dovish speeches throughout the week, with Fed Governor Christopher Waller characterized the economy as "doing well," asserting that this positive state allows the central bank to proceed cautiously and methodically with monetary policy adjustments.

The S&P 500 touched lows of 4,713 overnight, a break below the 4,615 would confirm a short-term double top. The Dow Jones fell to 37,101 and the Nasdaq fell the most to 16,551.

US Treasury yields rising beyond 4% also pressured equity markets as they hovered close to the highest level for the year.

Meanwhile, Energy stocks also slipped as oil prices continued to be pressured by disappointing Chinese data.