Wall Street makes mixed start as US retail sales worse than expected

Data for December showed a 1.1% decline in sales month-on-month, worse than the 0.3% fall expected by analysts

12.20pm: US benchmarks still mixed

US stocks were mixed at mid-session as traders await the outcome of a Federal Reserve meeting.

The Dow Jones Industrial Average was down 44 points at 30,155, while the S&P 500 added around three points at 3,699.

The Nasdaq index is ahead by around 48 points at 12,643.

Chris Beauchamp, Chief Market Analyst at IG, said US markets remained cautious in advance of the Fed meeting, but with hopes that a stimulus deal can be cobbled together before Christmas.

“Reports suggest a deal in the region of $900 billion will be agreed, and while this is well down on the estimates from earlier in the Autumn, investors will have to be content with this progress, which at least represents a commitment to support ordinary citizens and the US economy,” he said.

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9.38am: Wall Street starts mixed

Despite expectations of a positive start, the picture on Wall Street was more mixed on Wednesday morning following a worse than expected set of US retail sales data.

Shortly after the opening bell, the Dow Jones Industrial Average was down 0.01% at 30,194 while the S&P 500 inched up 0.06% to 3,696 and the Nasdaq rose 0.04% to 12,599.

The subdued start followed new data which revealed that new lockdown restrictions and a surge in COVID-19 cases hurt US retail sales in December, with the figures showing a 1.1% decline month-on-month, worse than the 0.3% fall expected by analysts.

The biggest falls were electronics with a 3.5% decline, a 6.8% fall for clothing, a 7.7%  drop in department store sales and a 4% fall for eating and drinking out.

“With an increasing number of city mayors and state governors warning of more movement restrictions to combat the rise in Covid-19 cases, the economy is facing a period of growing uncertainty. With more restaurants being forced to close and the threat of closure of non-essential retail in some areas the need for more support for the economy is growing. Hopefully we will get a fiscal package agreed to mitigate some of these headwinds, but it won’t be able to fully offset weaker consumer spending or the threat of rising joblessness”, analysts at ING said in a statement.

7.35am: Wall Street to start higher as stimulus and Brexit talks show signs of progress

Wall Street is expected to make a positive start on Wednesday morning as traders in New York drew optimism from progress in negotiations on both sides of the Atlantic.

Spread-betters are predicting that the Dow Jones Industrial Average will advance 78 points at the opening bell, while the S&P 500 is expected to rise 11 points and the Nasdaq is predicted to climb 29 points.

Market sentiment has been lifted by expectations that both talks over economic stimulus in the US and a Brexit trade deal will yield last-minute results ahead of their mutual December 31 deadlines.

“In both cases, there has been a painful lack of urgency to get a deal done which is why we find ourselves in the situation we are. But with critical deadlines now only days away, negotiations have seemingly become turbocharged and compromises are finally being made which is fuelling further optimism in the markets today”, said OANDA’s Craig Erlam.

“US stimulus talks have been going on for months and while emergency measures have bought some time, it’s now almost up. Programs are due to expire at the end of the year and the country is seeing its most severe surge in cases and fatalities since the start of the pandemic. The time for negotiation has passed, it’s time for action. A meeting of House and Senate majority and minority leaders on Tuesday appeared to go well with both sides appearing optimistic that a deal will be reached. With both wanting to tie a deal to the spending bill – which needs to be signed off by Friday to avoid a partial government shutdown – the prospects for a deal this week look good. They could technically back another temporary funding bill but that looks unlikely at this point”, he continued.

“Brexit talks continue to make progress on the more contentious issues, most notably level playing field, with Ursula von der Leyen echoing Michel Barnier’s view that a narrow path to a deal exists. Ignoring all of the drama for a second, it seems like the progress we’ve seen this week is significant after Boris Johnson and Ursula von der Leyen agreed to push ahead with negotiations on Sunday, despite previously wanting a deal by then…While both sides admit fishing remains a massive problem that little progress has been made on, it’s impossible to imagine a deal failing on this. Level playing field plays into the fundamentals of the single market for the EU and sovereignty for the UK, making it theoretically a potential deal breaker. Fishing is very political which is probably why it’s being left late in the day when final compromises can be struck. A deal this week is very possible, although it is Brexit so let’s not get too carried away”, Erlam added.

Away from the political wrangling, investors will also be closely eyeing any developments and commentary from the Federal Reserve later today following its final meeting of 2020.

Four things to watch for on Wednesday:

  • Commentary coming out of the Fed following its meeting today will be a key area of interest, however, interest rates are expected to remain at 0.25%
  • Also in focus will be the central bank’s economic projections for the coming months, particularly as COVID-19 vaccines begin to roll out across the US
  • The macro calendar will be eyed for the latest US retail sales data for November, which is forecast to show the first decline in seven months of around 0.3%, reversing 0.3% growth in October
  • The earnings calendar is relatively quiet as big names go, however, there are some fourth quarter figures are expected from housebuilder Corp () as well as from landscaping equipment maker Toro Co (NYSE:TTC)

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