Dow breaks 5-day winning streak; Nasdaq, S&P 500 also fall following retail sales numbers

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The major U.S. equity averages finished lower on Wednesday, as an uninspiring retail sales report gave investors an excuse to take profits following a recent rebound in stock prices. With the decline, the Dow broke a five-day winning streak, and the S&P 500 came off its highest level since April.

The Nasdaq (COMP.IND) -1.3%, the S&P 500 (SP500) -0.7%, and the Dow (DJI) -0.5%.

Wednesday’s action took place amid retail sales data and updated information from the Fed. July’s retail sales figures came in softer than anticipated, with data pointing to a flat reading with the previous month. This was lower than the forecasted 0.1% increase.

In the afternoon, the Fed released the minutes of its most recent policy meeting. The document showed that policymakers discussed downside risks to GDP growth from the central bank’s campaign to increase interest rates in the face of high inflation.

Even with this concern, the minutes remained generally hawkish. The document noted that “with inflation elevated and expected to remain so over the near term, some participants emphasized that the real federal funds rate would likely still be below shorter-run neutral levels after this meeting’s policy rate hike.”

Rates pushed higher during the day. The 10-year Treasury yield (US10Y) climbed basis points to 2.90% and the 2-year yield (US2Y) rose 3 basis points to 3.28%.

On the earnings front, Lowe’s edged higher following mixed results. Target slipped after missing on its top and bottom lines. The retailer also backed cautious revenue and margin guidance.

In response to the retail sales data, Pantheon Macroeconomics provided a generally bullish outlook. “If you’re looking for recession, you won’t find it here,” the firm said.

“The big picture here is favorable. Our preferred measure of core sales, which strips out autos, gasoline and food, rose 0.8% in July, and at a hefty 9.3% annualized rate in the three months to July, compared to the previous three months. The hit from the surge in gas prices is barely visible in these data, because many people have been willing to absorb the blow by running down some of the huge pile of savings accumulated during the pandemic.”

Among active stocks, Manchester United showed gains, even though Elon Musk said he was joking when he tweeted about buying the club.

And Bed Bath & Beyond soared again, continuing a recent surge likely prompted by a short squeeze. The latest leg up was helped by word that Ryan Cohen was buying deep-out-of-the-money calls for January.

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