Stocks fell on Friday, following a strong retail sales report that could bolster the argument that the economy is strong and may not need support in the form of lower borrowing costs.
Separately, a Federal Reserve official said it was too early to say whether the central bank should cut interest rates at its meeting next month.
Another rate cut in December “is certainly on the table, but it’s not a done deal,” Boston Fed President Susan Collins said in an interview Thursday night. “There’s more data we’ll see between now and December, and we’ll have to continue to weigh what makes sense.”
The Dow Jones Industrial Average fell about 350 points, or 0.8%. The S&P 500 fell more than 1% and the Nasdaq Composite lost about 2.5%.
The latest moves highlighted investor uncertainty about whether the Federal Reserve is in a position to continue cutting rates as much as markets expect, in part because the economy continues to hold up well.
On Friday, the Commerce Department said retail sales rose 0.4% in October from September, better than economists’ forecasts for a 0.3% increase. Officials also sharply revised up their September sales growth figures to 0.8%, from an initial estimate of 0.4% growth.
“Several speeches by Federal Reserve officials show growing concern that disinflation is hitting a wall,” Jefferies analyst Thomas Simons wrote to clients after Friday’s data. “But we don’t think there is enough evidence to confirm these hypotheses before the next meeting.”
The next Federal Reserve meeting will be December 17-18. Officials will look at inflation and employment data for November before that meeting.
Collins said Thursday that she saw no evidence that inflation was picking up due to new sources of strength in the economy, aligning with a view that Federal Reserve Chair Jerome Powell expressed last week. Both suggested that the recent stickiness of inflation has been more of an echo or “catch-up” effect of the big price increases of recent years, such as the rise in auto insurance costs to reflect past increases. in car prices which have since decreased.
“As far as I can tell, I see no evidence of new price pressures,” Collins said. The firmer inflation of recent months instead reflects “the effects of the long-term dynamics of past shocks,” he said.