Disappointing Retail Sales Data May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to extend the sharp pullback seen in the previous session.

Early selling pressure may be generated in reaction to a report from the Commerce Department unexpectedly showing a steep drop in U.S. retail sales in the month of December.

The Commerce Department said retail sales tumbled by 1.9 percent in December after edging up by a revised 0.2 percent in November.

The sharp pullback surprised economists, who had expected retail sales to come in unchanged compared to the 0.3 percent growth originally reported for the previous month.

Excluding auto sales, retail sales plunged by 2.3 percent in December after inching up by a revised 0.1 percent in November.

Economists had expected ex-auto sales to rise by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

Meanwhile, a separate report from the Labor Department unexpectedly showed a modest decrease in U.S. import prices in the month of December.

The Labor Department said import prices edged down by 0.2 percent in December after climbing by 0.7 percent in November. The dip surprised economists, who had expected import prices to rise by 0.3 percent.

The report also unexpectedly showed a steep drop in export prices, which plunged by 1.8 percent in December after increasing by a downwardly revised 0.8 percent in November.

Economists had expected export prices to surge by 1.1 percent compared to the 1.0 percent jump originally reported for the previous month.

Banking stocks are likely to be in focus following earnings news from financial giants JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC).

Shares of JPMorgan and Citigroup are moving notably lower in pre-market trading even though both companies reported better than expected fourth quarter earnings.

Wells Fargo is also seeing some pre-market weakness despite reporting fourth quarter results that beat analyst estimates on both the top and bottom lines.

With tech stocks leading the way lower, stocks showed a significant move back to the downside during trading on Thursday. The tech-heavy Nasdaq showed a particularly steep drop, ending the day at its lowest closing level in three months.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Nasdaq plunged 381.58 points or 2.5 percent to 14,806.81, the S&P 500 tumbled 67.32 points or 1.4 percent to 4,659.03 and the Dow fell 176.70 points or 0.5 percent to 36,113.62.

The sharp pullback by the Nasdaq came as traders cashed in on some of the strength seen in the tech sector over the past few days.

Tech stocks got off to a rocky start in the New Year amid concerns about higher interest rates but regained some ground earlier this week.

Today’s subsequent sell-off suggests some traders remain wary about making big bets on tech stocks ahead of likely interest rate hikes in the near future.

Software stocks turned in some of the worst performances on the day, dragging the Dow Jones U.S. Software Index down by 4.3 percent. The index tumbled to its lowest closing level in almost six months.

Substantial weakness also emerged among semiconductor stocks, as reflected by the 2.3 percent slump by the Philadelphia Semiconductor Index.

Outside of the tech sector, healthcare, brokerage and retail stocks also came under pressure, while significant strength remained visible among airline stocks.

Traders were also digesting another reading on U.S. inflation, with a report from the Labor Department showing only a slight uptick in U.S. producer prices in the month of December.

The Labor Department said its producer price index for final demand edged up by 0.2 percent in December after jumping by an upwardly revised 1.0 percent in November.

Economists had expected producer prices to rise by 0.4 percent compared to the 0.8 percent increase originally reported for the previous month.

The report also showed the annual rate of producer growth slowed to 9.7 percent in December from a record high 9.8 percent in November.

Meanwhile, a separate report from the Labor Department showed an unexpected increase in initial jobless claims in the week ended January 8th.

The report said initial jobless claims rose to 230,000, an increase of 23,000 from the previous week’s unrevised level of 207,000. Economists had expected jobless claims to edge down to 200,000.

Commodity, Currency Markets

Crude oil futures are inching up $0.10 to $82.22 a barrel after falling $0.52 to $82.12 a barrel on Thursday. Meanwhile, after slipping $5.90 to $1,821.40 an ounce an ounce in the previous session, gold futures are rising $4.50 to $1,825.90 an ounce.

On the currency front, the U.S. dollar is trading at 113.53 yen versus the 114.20 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1448 compared to yesterday’s $1.1455.

Asia

Stock markets in Asia yielded to the panic of an imminent interest rate hike scenario and recorded major losses on Friday.

An interest rate hike by the Bank of Korea and hawkish comments by Fed officials caused investors to fret over the departure of an easy monetary policy stance.

The worsening situation on the virus front exacerbated the pain, causing regional equities to give up recent gains.

China’s Shanghai Composite Index slumped 34.00 points or 1 percent to finish at 3,521.26. Meanwhile, data revealed exports from China grew 20.9 percent year-on-year in December, while imports to China rose by 19.5 percent.

The Japanese benchmark Nikkei 225 Index shed 364.85 points or 1.3 percent to end Friday’s trading at 28,124.28, tracking losses at the Wall Street.

Hitachi Construction Machinery Co. plunged almost 17 percent following reports that Hitachi Ltd would be divesting almost a 26 percent stake in the company.

Toyota Tsusho Corp., Nissan Chemical Industries and Fanuc Corp. all lost more than 5 percent.

Meanwhile, Fast Retailing Co. gained 8 percent after announcing upbeat results. Seven & I Holdings gained close to 5 percent.

The Hang Seng Index of the Hong Kong Stock Exchange dipped 46.45 points or 0.2 percent from previous close to finish trading at 24,383.32. The day’s high was at 24,383.32 and the low at 24,140.81.

The Korean Stock Exchange’s Kospi Index lost 40.17 points or 1.4 percent to close at 2,921.92. The day’s trading range was between 2,914.73 and 2,944.97 against the backdrop of the Bank of Korea increasing the benchmark rates to the pre-pandemic level.

Australia’s S&P/ASX200 Index closed trading at 7,393.90 after losing 80.50 points or 1.1 percent. The index is currently 3.1 percent below its 52-week high of 7,632.80.

Resmed Inc. and Ramelius Resources gained more than 3 percent. AGL Energy, Alumina Ltd and IGO Ltd gained more than 2 percent.

Shares of global Investment business Pendal Group dropped more than 15 percent after it reported around $6.8 billion net fund outflows for the December quarter.

Technology business Afterpay Ltd. declined following the announcement of its removal from the ASX 200 Index pursuant to its acquisition by Block,Inc. Zip Co., Whitehaven Coal and Xero all declined more than 5 percent.

Europe

European stocks have moved mostly lower on Friday, as a sea of red descends on global equity markets bracing for Fed rate hikes as early as March.

Comments by Fed officials that the skyrocketing inflation warranted interest rate hikes appear to have fueled risk aversion in stock markets across the globe.

While the U.K.’s FTSE 100 Index has fallen by 0.5 percent, the French CAC 40 Index and the German DAX Index are down by 1 percent and 1.1 percent, respectively.

Data released during the day indicated that the UK posted a trade surplus of GBP 0.63 billion, the largest since May. Exports surged 4.6 percent, while imports rose at a softer 3.8 percent.

In addition, U.K. GDP grew by 0.9 percent in November 2021 versus the 0.2 percent expansion in October. Markets were expecting 0.4 percent growth.

U.S. Economic Reports

A report released by the Commerce Department on Friday unexpectedly showed a steep drop in U.S. retail sales in the month of December.

The Commerce Department said retail sales tumbled by 1.9 percent in December after edging up by a revised 0.2 percent in November.

The sharp pullback surprised economists, who had expected retail sales to come in unchanged compared to the 0.3 percent growth originally reported for the previous month.

Excluding auto sales, retail sales plunged by 2.3 percent in December after inching up by a revised 0.1 percent in November.

Economists had expected ex-auto sales to rise by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

Meanwhile, a separate report from the Labor Department unexpectedly showed a modest decrease in U.S. import prices in the month of December.

The Labor Department said import prices edged down by 0.2 percent in December after climbing by 0.7 percent in November. The dip surprised economists, who had expected import prices to rise by 0.3 percent.

The report also unexpectedly showed a steep drop in export prices, which plunged by 1.8 percent in December after increasing by a downwardly revised 0.8 percent in November.

Economists had expected export prices to surge by 1.1 percent compared to the 1.0 percent jump originally reported for the previous month.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of December. Industrial production is expected to rise by 0.4 percent.

The University of Michigan is due to release its preliminary reading on consumer sentiment in the month of January at 10 am ET. The consumer sentiment index is expected to edge down to 70.0 in January from 70.6 in December.

Also at 10 am ET, the Commerce Department is scheduled to release its report on business inventories in the month of November. Business inventories are expected to jump by 1.0 percent.

Philadelphia Federal Reserve President Patrick Harker is also due to speak on the local economic outlook before a virtual Chamber of Commerce for Greater Philadelphia Economic Outlook event at 10 am ET.

At 11 am ET, New York Federal Reserve President John Williams is scheduled to make keynote remarks in a webinar at the C. Peter McColough Series on International Economics with John C. Williams.

Stocks In Focus

Shares of Boston Beer (SAM) are moving notably lower in pre-market trading after the brewer lowered its full-year earnings outlook due to supply chain issues.

Sherwin-Williams (SHW) may also see initial weakness as supply chain issues also led the paint company to lower its fourth quarter and full-year guidance.

On the other hand, casino operators Las Vegas Sands (LVS), Wynn Resorts (WYNN), Melco Entertainment (MLCO) and MGM Resorts (MGM) are seeing significant premarket strength after Macau said it would cap the number of casino licenses at six.

Pharmaceutical company Bausch Health (BHC) may also move to the upside after its eyecare unit Bausch + Lomb filed for an initial public offering.