Wall St falls on caution over Fed decision after strong retail sales

By Lisa Pauline Mattackal and Purvi Agarwal

(Reuters) - Technology stocks weighed on Wall Street on Tuesday, as investors grew cautious ahead of the Federal Reserve's interest rate decision this week following a stronger-than-expected retail sales reading.

U.S. retail sales increased more than expected in November amid an acceleration in motor vehicle purchases, consistent with strong underlying momentum in the economy as the year winds down.

"It's just further evidence that at an aggregate level, the U.S. consumer is still in great shape ... that just proves that the U.S. economy is on strong footing," said Eric Sterner, chief investment officer for Apollon Wealth Management.

The U.S. 10-year Treasury note yield inched higher, hovering near a three-week high of 4.428% and pressuring rate-sensitive equities, as market bets strengthened on a more cautious Fed in 2025.

At 9:41 a.m. ET, the Dow Jones Industrial Average fell 231.55 points, or 0.53%, to 43,487.22, the S&P 500 lost 28.68 points, or 0.47%, to 6,045.40 and the Nasdaq Composite lost 97.40 points, or 0.48%, to 20,078.88.

The CBOE Volatility Index , Wall Street's "fear gauge", rose above 15 for the first time in nearly three weeks.

Nine of the 11 S&P 500 sectors were lower with energy stocks down 1.6%, while financials and information technology followed with a 0.9% and 0.6% loss respectively.

Rate-sensitive megacap and growth stocks were mixed, with Nvidia (NASDAQ:NVDA ) in the lead, down 3.5% and Amazon.com (NASDAQ:AMZN ) losing 1.2%.

Tesla (NASDAQ:TSLA ) was up marginally after Mizuho (NYSE:MFG ) upgraded the electric-vehicle maker's stock to "outperform" from "neutral" and hiked its price target by $285 to $515.

"This will be the second year in a row of the S&P delivering returns of over 20%. And that's only a third time that's happened in the last century, so I think there's some profit taking," Sterner said.

Market focus stayed on the Fed's monetary policy decision on Wednesday where a 25 basis point cut is all but priced in, and the "dot plot" with policymakers' rate forecasts will be high up on investors' radar.

However, traders increasingly expect the central bank to more cautious in 2025, as economic indicators point to continued resilience and inflation remains persistent.

Wall Street saw a fairly strong session on Monday, where the Nasdaq closed at a record high and the S&P 500 gained ground.

Still, U.S. stocks remain on track to end December on a positive note with the S&P 500 set for its best year since 2019 with an over 27% year-to-date rise, powered by gains in technology companies, Fed rate cuts and optimism on the impact of Trump's corporate policies.

Crypto-focused stocks continued to rally as bitcoin surpassed $107,000. MARA Holdings gained 1.8% and Riot Platforms (NASDAQ:RIOT ) rose 1.4%.

Pfizer (NYSE:PFE ) gained 4.1% after the drugmaker forecast 2025 profit roughly in line with Wall Street expectations.



Declining issues outnumbered advancers by a 2.38-to-1 ratio on the NYSE and by a 1.33-to-1 ratio on the Nasdaq.

The S&P 500 posted six new 52-week highs and 16 new lows, while the Nasdaq Composite recorded 41 new highs and 71 new lows.

Source: Investing.com