By Caroline Valetkevitch
NEW YORK (Reuters) -Global stock indexes mostly rose, Treasury yields declined and the dollar weakened against the Japanese yen on Thursday after a larger-than-expected drop in U.S. retail sales in January prompted a slight repositioning of expectations for interest rate cuts.
The Commerce Department report showed retail sales dropped 0.8% last month, the biggest fall since February 2023. Economists polled by Reuters had forecast retail sales dipping 0.1%.
However, winter storms were seen as possible factors affecting the data, with economists noting that a fairly healthy labor market remains supportive for consumer spending.
A separate report showed initial jobless claims fell 8,000 to a seasonally adjusted 212,000 for the week ended Feb. 10, slightly below the 220,000 estimate.
Investors are closely watching economic data for clues on when the Federal Reserve might begin cutting interest rates.
Bets for an at least 25-basis-point rate cut in May edged up to 40.6%, while odds for June stood at 82%, according to the CME Group’s FedWatch Tool.
A warmer reading of U.S. inflation earlier this week prompted traders to cut the chances of a prompt rate cut from the Fed, which lifted the dollar and sparked a sell-off in the fixed income market.
Traders also are once again watching dollar/yen as it topped 150 in the last few days, a critical level that puts the market on alert for possible Japanese intervention to weaken its currency.
The yen strengthened despite unexpectedly weak Japanese gross domestic product figures for the fourth quarter of 2023, which saw the country overtaken by Germany as the world’s third-largest economy.
Against the yen, the dollar was down 0.47% at 149.83. The dollar index fell 0.45% at 104.21, while the euro was up 0.49% at 1.0778.
The yield on the benchmark U.S. 10-year Treasury note fell 5 basis points to 4.212% and was on track for a second straight decline following a jump on Tuesday after the hot reading on consumer prices.
“Clearly the retail sales came in somewhat below expectations and fits with our narrative that this is going to be a slower growth environment as we traverse 2024, but one where we still expect that there will be persistent economic growth, meaning that our base case is avoiding a recession in mid-2024,” said Bill Northey, senior investment director at U.S. Bank Wealth Management in Billings, Montana.
The Dow Jones Industrial Average rose 229.41 points, or 0.61%, to 38,653.68, the S&P 500 gained 13.69 points, or 0.27%, to 5,014.71 and the Nasdaq Composite lost 12.74 points, or 0.08%, to 15,846.41.
MSCI’s gauge of stocks across the globe rose 4.33 points, or 0.58%, to 749.28, while Europe’s STOXX 600 index rose 0.67%.
Earlier on Thursday, enthusiasm for all things AI also pushed Taiwan stocks to a record high.
Japan’s Nikkei closed 1.2% higher, climbing as high as 38,188.74 during the session, the most since January 1990.
U.S. crude gained 1.06% to $77.45 a barrel and Brent rose to $82.37 per barrel on the day. Spot gold added 0.75% to $2,007.29 an ounce.
(Reporting by Caroline Valetkevitch; additional reporting by Amanda Cooper in London, Ankur Banerjee in Singapore and Chuck Mikolajczak in New York; Editing by Jacqueline Wong, Tomasz Janowski and Susan Fenton)
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