Stocks closed lower again Wednesday after impressive retail sales data lowered expectations for a March rate cut. Today's earnings reports did little to lift investor sentiment, with one notable financial firm tumbling on a top-line miss.
Ahead of the open, data from the Census Bureau showed retail sales rose 0.6% from November to December and were up 5.6% on an annual basis. The results came in higher than economists were expecting thanks to a holiday-related pop in sales at clothing and general merchandise stores.
"The Fed was already hammering away on its 'no rush to cut rates' message, and today's stronger-than-expected retail sales won't give them any reason to change their tune," says Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley.
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Indeed, CME Group's FedWatch Tool indicates futures traders are now pricing in a 58% chance the Federal Reserve will cut interest rates by a quarter percentage point in March, down from 63% one day ago.
Tesla sheds $14 billion in market value on more price cuts
In single-stock news, Tesla (TSLA) slumped 2.0% – shedding $14 billion in market value – after the electric vehicle (EV) maker said it slashed the prices of its Model Y cars by up to 8% in several European countries, including Germany. The price cuts are similar to moves Tesla made earlier this month when it lowered the cost of its Model 3 and Model Y vehicles in China.
Focus will remain on Tesla and its price cuts next week, with the company slated to appear on Wednesday's earnings calendar. "For quarterly results, the debate will turn to margins," says UBS Global Research analyst Joseph Spak (Neutral, the equivalent of Hold). "We believe some pricing actions helped drive volume (margin negative) but this is likely offset by higher volume absorption and likely lower input costs."
Tesla's price action today sparked a broad selloff in EV stocks, with Nio (NIO, -3.8%), Rivian Automotive (RIVN, -6.0%) and XPeng (XPEV, -4.9%) among the day's biggest decliners.
Spirit Airlines continues to spiral after JetBlue bid is blocked
Elsewhere, Spirit Airlines (SAVE) stock continued to tumble after a federal judge on Tuesday blocked JetBlue Airways' (JBLU, -8.7%) $3.8 billion bid to buy the discount air carrier.
"A post-merger, combined firm of JetBlue and Spirit would likely place stronger competitive pressure on the larger airlines in the country," Judge William Young wrote in his ruling. "At the same time, however, the consumers that rely on Spirit's unique, low-price model would likely be harmed."
SAVE shares shed 47% Tuesday and another 22.5% today.
Schwab slips after reporting a top-line miss
On the earnings front, Charles Schwab (SCHW, -1.3%) made headlines after the brokerage firm disclosed its fourth-quarter results. Revenue for the three-month period fell 19% year-over-year to $4.46 billion, just shy of analysts' estimates, while earnings per share declined 36% – less than expected – to 68 cents per share.
CFRA Research analyst Michael Elliott maintained a Strong Buy rating on the financial stock after the earnings report. "Looking to 2024, SCHW remains in a strong liquidity position, and should continue to pay off short-term funding sources, helping net interest margin expand despite likely rate cuts and driving net interest income growth of 5% to 8%," Elliott wrote in a note to clients.
As for the major indexes, the Nasdaq Composite fell 0.6% to 14,855, the S&P 500 shed 0.6% to 4,739, and the Dow Jones Industrial Average gave back 0.3% to 37,266.
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