NEW YORK (AP) — The U.S. stock market edged back from its all-time high Friday following the latest report on the economy to come in surprisingly weak, this time about how much shoppers are spending at retailers. Such data could keep interest rates low, which is something Wall Street loves, but it also raises the risk of a slowing economy when inflation is still high.
The S&P 500 slipped 0.2% from its record set the day before. The Dow Jones Industrial Average dipped 107 points, or 0.2%, and the Nasdaq composite sank 0.3%.
Stocks gave up modest gains from early in the morning after oil prices swung higher. The price for a barrel of Brent crude rose 1.7% to $88.52 as uncertainty continues about when the war with Iran will allow oil tankers to freely exit the Persian Gulf again.
Also raising uncertainty was a report showing shoppers spent less at U.S. retailers last month than the month before. That surprised economists, who were forecasting another month of growth.
On the bright side for financial markets, such a pullback in spending could take pressure off inflation. Inflation remains much higher than anyone would like, but reports earlier this week suggested the pace of increases in prices is decelerating.
If inflation keeps trending that way, it could encourage the Federal Reserve to hold off on hikes to interest rates. Higher rates would help keep a lid on inflation, but they do so by intentionally slowing the economy and making it more expensive for everyone to borrow money.
The downside of such data, including last week’s surprisingly weak report on the U.S. job market, is that they raise the risk of a slowing economy. The Fed has no good tool to fix both a stagnating economy and high inflation at the same time, which is why what’s called “stagflation” is seen as a worst-case scenario.
Some on Wall Street cautioned against overreacting to the weak data on U.S. retail sales, even if it was broad based. It could simply be a snap back after retail sales in earlier months were boosted by unusual factors such as big tax refunds, the World Cup and even an earlier Prime Day event at Amazon, according to Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute.
U.S. consumers nevertheless appear to be getting more discouraged about the economy. A preliminary survey by the University of Michigan suggested sentiment among them is weakening by more than economists expected.
The survey said drops occurred across the political spectrum and showed up particularly among older, lower-income and other groups who can be hurt most by inflation.
