US equity indexes saw a decline after midday Tuesday as retail sales exceeded expectations, complicating the Federal Reserve's path to policy easing. The S&P 500 dropped 0.4% to 6,049.2, while the Nasdaq slipped 0.3% to 20,112.1, and the Dow Jones Industrial Average fell 0.7% to 43,392.4. The energy sector experienced the most significant decline during the day, along with financials, whereas real estate emerged as one of the few gainers. In terms of economic indicators, US retail sales increased by 0.7% in November, marking the highest growth since the 1.1% reported for the same month in 2021, and surpassing the 0.6% anticipated based on a Bloomberg survey.
The prior month's figures showed a slight gain of 0.5%. Even when discounting sales from motor vehicles and gasoline stations, retail sales still rose by 0.2% in November, following a similar 0.2% increase in October. With this retail sales data, Morgan Stanley projected that real consumption growth for Q4 will likely reach 2.6% quarter-over-quarter, a slight increase from its previous estimate of 2.5%.
This reflects a robust start to the holiday shopping season. Recently, both the headline and core consumer price index also rose in November, aligning with market expectations. However, the producer price index data was hotter than anticipated, raising concerns that the Fed may pause its easing cycle after a much-expected 25 basis-point cut in December. The Fed is scheduled to release its policy statement and Summary of Economic Projections on Wednesday, followed by a press briefing from Chair Jerome Powell.
As of Tuesday afternoon, the market indicates a higher likelihood of only two rate cuts being executed next year. Additionally, US industrial production decreased by 0.1% in November, falling short of the anticipated 0.3% increase based on a Bloomberg survey and reflecting a revised 0.4% decline in October. The National Association of Home Builders reported that the monthly housing market index remained unchanged in December at 46 from November, falling below the anticipated 47 in a Bloomberg survey.
This index stands above the 37 reported a year ago. In treasury markets, US Treasury yields showed mixed results intraday, with the 10-year yield declining by 1.8 basis points to 4.38%, while the two-year yield dropped 1.3 basis points to 4.24%. In corporate news, Pfizer ($PFE) projected enhanced earnings for 2025, with revenues expected to align with this year's likely results as the pharmaceutical leader focuses on disciplined execution and cost reduction strategies.
This expectation led to Pfizer's shares surging 4.6% intraday, making it the top performer on the S&P 500. Conversely, Amentum ($AMTM) reported a decline in fiscal Q4 adjusted earnings and sales, causing its shares to fall by 11% intraday, marking it as the worst performer on the index. In commodity markets, West Texas Intermediate crude oil futures fell by 1.3% to $69.77 per barrel, while gold decreased by 0.3% to $2,662.4 an ounce and silver fell by 0.4% to $30.93 per ounce..