Stocks fell Friday after a solid retail sales report that could reinforce the case that the economy is strong and may not need support in the form of lower borrowing costs.
In addition, a Federal Reserve official said it was too early to say at next month’s meeting whether the central bank should cut rates.
Another rate cut in December is “certainly on the table, but it’s not a done deal yet,” Boston Fed President Susan Collins said in an interview late Thursday. “There is more data we will see between now and December, and we will 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 fell about 2.5%.
The latest moves have underscored investor uncertainty about whether the Fed will be able to continue cutting rates as sharply as markets now 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 revised their September sales growth figures sharply upward to 0.8%, from an initial estimate of 0.4%.
“Several speeches from Fed officials show growing concern that disinflation is hitting a wall,” Jefferies analyst Thomas Simons wrote to clients on Friday after the numbers. “But we don’t think there will be enough evidence to confirm these hypotheses before the next meeting.”
The Fed’s next meeting is December 17-18. Officials will see inflation and employment data for November before that meeting.
Collins said Thursday that she sees no evidence that inflation is picking up due to new sources of strength in the economy, echoing the view put forward by Fed Chairman Jerome Powell last week. Both suggested that the recent inflation stability was instead an echo or catch-up effect of large price increases in recent years, such as the rise in auto insurance costs due to previous increases in car prices that have since subsided.
“To my knowledge, I see no evidence of new price pressures,” Collins said. The firmer inflation in recent months instead reflects “the effects of the long-term dynamics of previous shocks,” she said.
