The Dow and the S&P 500 fell on Tuesday after a dour forecast from Home Depot and April retail sales data pointed to consumers feeling the pinch from rising prices and interest rates, ahead of crucial debt limit talks.
The Commerce Department reported retail sales rose 0.4% in April, at half the pace against an expected increase of 0.8%. But the underlying trend was solid, despite growing risks of a recession this year.
The retail sales data has been positive in several months, but it’s still weak,” said Jamie Cox, managing partner at Harris Financial Group.
“It basically reinforces what we saw from Home Depot this morning. You are probably seeing the end of the decline in retail sales, but it’s not going to be a smooth ride from here.”
Dow Jones Industrial Average component shed 1.4%, hitting its lowest level in over six months after the company lowered its annual sales forecast.
Shares of rival Lowe’s Companies Inc fell 1.1%, while retail giant Walmart Incslipped 0.8%.
Data recently has pointed to a slowing U.S. economy, which is starting to feel the heat from the Federal Reserve’s restrictive monetary policy, and also heightened expectations for when the central bank will pause its hiking cycle.
Cleveland Fed President Loretta Mester, however, said on Tuesday that she does not think the Fed is at a point yet where it can hold interest rates steady for a period of time.
The main indexes started the week with modest gains, as trading was range-bound amid a wrangling in Washington between the White House and Republicans.
“As we get closer to the perceived ‘X’ date, the market has to price in greater probability of some sort of negative event around that, and today there was some further rhetoric from politicians that they’re no closer today than they were maybe last week,” said Bryant VanCronkhite, portfolio manager at Allspring Global Investments