Wall St slides as Treasury yields hurt megacaps after retail sales data By Reuters

By Johann M Cherian and Exchange rateAnkika Biswas

(Reuters) - Wall Street's main indexes dropped on Wednesday, as megacaps took a hit on rising Treasury yields, after a higher-than-anticipated rise in December U.S. retail sales tempered hopes of early interest-rate cuts from the Federal Reserve this year.

The benchmark fell to an over one-week low, while the blue-chip Dow dropped to a near one-month low.

Megacaps including Apple (NASDAQ:), Alphabet (NASDAQ:), Amazon.com (NASDAQ:) and Meta Platforms (NASDAQ:) lost between 1.3% and 2.2%, as the rose to over 4%.

Information technology was the worst hit, down 1.4% in an overall decline in the 11 S&P 500 sectors.

Data showed retailers offering discounts and increased motor-vehicle purchases aided a higher-than-expected rise in U.S. retail sales, keeping the economy on a solid footing in 2024.

Traders' expectations of a 25-basis-point rate cut by the Fed in March dipped to 55%, from around 60% before the data was released.

"After the retail sales data, investors are worried that the Fed will be less likely to cut rates in March, thereby delaying the first rate cut," said Sam Stovall, chief investment strategist at CFRA Research in New York.

"The market right now is going through a digestive phase as it reassesses the timing and the magnitude of rate cuts in this calendar year."

Halfway into the first month of 2024, Wall Street's near-14% rally in the last two months of 2023 is losing steam as U.S. central bankers continue to downplay expectations for a quick start to the policy-easing cycle, while data on the economy's performance appears mixed.

The CBOE Market Volatility Index, a market fear gauge, rose to an over two-month high of 14.80 points during the day.

Investors will also keenly monitor remarks by several Fed officials in the day, along with the release of the "Beige Book", a snapshot of the U.S. economy, at 2:00 p.m. ET.

Meanwhile, Tesla (NASDAQ:) lost 2.5% after the electric-vehicle maker slashed the prices of its Model Y cars in Germany, a week after reducing prices for some China models.

Morgan Stanley fell 1.7% on brokerage rating downgrades after Tuesday's weak fourth-quarter earnings. Other lenders such as Bank of America and Citigroup were also down over 1% each.

At 9:54 a.m. ET, the was down 110.22 points, or 0.30%, at 37,250.90, the S&P 500 was down 36.50 points, or 0.77%, at 4,729.48, and the was down 210.44 points, or 1.41%, at 14,733.90.

The small-cap index dropped 1.1% to a fresh one-month low.

On the earnings front, (NYSE:) was down 5.3%, after its fourth-quarter profit fell 47%.

(NYSE:) slid 20.7%, following a plunge in the previous session, after a U.S. judge blocked JetBlue from acquiring the carrier.

Ford Motor (NYSE:) lost 1.8% on a report that UBS had downgraded the stock.

Boeing (NYSE:) gained 1.1% after the Federal Aviation Administration said inspections of an initial group of 737 MAX 9 airplanes had been completed.

Declining issues outnumbered advancers for a 4.64-to-1 ratio on the NYSE and a 3.56-to-1 ratio on the Nasdaq.

The S&P index recorded 18 new 52-week highs and three new lows, while the Nasdaq recorded 20 new highs and 133 new lows.

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