U.S. stocks were falling on Tuesday as disappointing data out of China and stronger-than-expected retail sales data in the U.S. fueled concerns about interest rates.
At 9:34 ET (13:34 GMT), the Dow Jones Industrial Average was down 159 points or 0.4%, while the S&P 500 was down 0.4% and the NASDAQ Composite was down 0.2%.
Data on China’s industrial output and retail sales pointed to a slowing economy in the past month. China’s central bank, in a surprise move, marginally cut key interest rates on Tuesday.
In the U.S. the main equities indices posted gains on Monday, with the tech-heavy Nasdaq Composite the star performer, closing 1.1% higher. This sector has been fueled this year by expectations that the Federal Reserve is nearing the end of its interest rate increases.
Sentiment among global investors improved in August to its least bearish since February 2022, a Bank of America survey showed on Tuesday, with cash allocations falling to 4.8% from 5.3% and the underweight in equities narrowing to the smallest since April 2022.
Retail sales, Home Depot earnings in focus
The Federal Reserve is widely expected to pause its rate-hiking cycle in September at its next policy meeting, but there continues to be debate about whether July’s rate increase would be the final one.
The latest U.S. retail sales data, for July rose more than expected and could be a factor in the Fed’s next move. The yearly reading was up 3.17% versus expectations for a gain of 1.5%, while the monthly gain was 0.7% versus expectations for 0.4%. The reading matches the trend of a resilient consumer even in the face of rising rates though the Fed may decide it has more work to do to calm inflation.
There are also earnings reports from a number of top retailers due this week, starting with Home Depot (NYSE:HD), which beat expectations on profit but posted a dip in same store sales. The report could firm up expectations on consumer spending trends heading into the crucial holiday sales months this fall. Home Depot shares rose 1.9%.
Despite the dip, the home improvement retailer reported a smaller-than-expected decline in quarterly same-store sales, as demand was buoyed by Americans spending on small-scale home-improvement projects amid signs of stabilization in the housing market. It also announced a $15 billion stock buyback plan.
Tesla launches U.S. cheaper versions
Elsewhere, Tesla (NASDAQ:TSLA) will be in focus after the electric vehicle manufacturer launched two cheaper versions of its Model S sedan and Model X SUV in the U.S. with shorter driving ranges.
Homebuilders D.R. Horton (NYSE:DHI) and Lennar (NYSE:LEN) both gained premarket after Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) revealed new positions in the stocks, while Discover Financial (NYSE:DFS) slumped after the announcement of the resignation of its chief executive.
Crude retreats as China’s economic growth slows
Crude prices fell Tuesday, after weak industrial production and retail sales data in China showed that growth in the second-largest economy in the world slowed further last month, likely reducing demand for crude.
WTI was down 1% to $81.66 a barrel, while Brent crude was down 0.7% to $85.64 a barrel. Gold fell 0.5% to $1,934.
China’s central bank unexpectedly cut key policy rates for the second time in three months earlier Tuesday to try and support its struggling economy, but this was deemed insufficient to turn sentiment, especially after Russia’s central bank hiked its key interest rate by 350 basis points to 12%.
Attention will turn to the U.S. market, with the release of inventory data from the industry group American Petroleum Institute later in the session, as a precursor to official inventory data from the U.S. Energy Information Administration on Wednesday.
(Peter Nurse and Oliver Gray contributed to this item.)
