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U.S. retail sales faded over the final month of the year, data indicated Thursday, but a key reading on spending that feeds into economic-growth figures powered higher, adding further complexity to inflation forecasts heading into 2025.
Headline sales rose 0.4% in December to a collective tally of $729.2 billion, the Commerce Department, just inside Wall Street's consensus forecast of a 0.6% gain. The November reading was revised higher, to a gain of 0.8%.
The closely tracked control-group number, which excludes autos, building materials, office supplies, gas-station sales and tobacco, and feeds into the government's GDP calculations, rose 0.7% on the month. That topped the Wall Street consensus forecast of 0.4% and November's gain of 0.4%.
Mastercard's closely tracked SpendingPulse report, published late last month, showed sales for Nov. 1 through Dec. 24 rose 3.8% from the year-earlier period, even as the latest report reflected five fewer shopping days than it did in 2023.
U.S. stocks pared gains following the data release, as traders bet that the solid spending tally, alongside data indicating a more resilient labor market, could further reduce bets on 2025 interest-rate cuts from the Federal Reserve.
"Investors are skittish amid elevated volatility and as the S&P 500 is in the throes of a 5% to 10% pullback. Wall Street’s relief rally on Wednesday highlights how worried investors have become, particularly about rate cuts and inflation," said Bret Kenwell, U.S. investment analyst at eToro. "That’s as investors panicked at last week’s strong jobs report and despite the fact that stocks tend to do well in an environment with mild inflation."
Ultimately, we want to see a strong jobs market and retail sales. That tells us that the consumer is healthy and confident, two important observations for an economy that has roughly two-thirds of its GDP driven by consumer spending," he added. "Combined with overwhelming negative sentiment, the latest ‘good not great’ retail sales figure might be enough to thread the needle for Wall Street right now and keep Wednesday’s rally intact."
Futures contracts tied to the S&P 500 suggest a 3 point opening bell bump while those linked to the Dow Jones Industrial Average are called 133 points lower. The tech-focused Nasdaq is priced for a 50-point gain.
Benchmark 10-year Treasury note yields edged 2 basis points higher to 4.681% following the data release, while 2-year notes were up 2 basis points to 4.295%.
Related: Inflation data tames key headwind for S&P 500, Fed interest rate cuts
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.04% higher at 106.901.