Wall Street falls as surprise drop in retail sales rattle investors

By Amy Caren Daniel and Shreyashi Sanyal

(Reuters) - U.S. stocks fell on Thursday, as consumer and retail stocks dropped after a sharp decline in retail sales in December suggested a slowdown in economic activity.

Retail sales tumbled 1.2 percent in the last month of 2018, the commerce department said, the largest decline since September 2009 when the economy was emerging from a recession. Economists polled by Reuters had forecast retail sales increasing 0.2 percent.

The S&P consumer staples declined 1.18 percent, the most among the 10 major sectors trading lower, also weighed down by a steep drop in shares of Coca-Cola Co.

The soda maker fell 7 percent after forecasting full-year profit well below expectations and reporting a quarterly decline in volumes in North America.

The S&P retailing index fell 1.33 percent, as Amazon.com dropped 1.4 percent, while home improvement chains Home Depot Inc and Lowe's Companies slipped 1 percent each.

"The numbers were a bit of a surprise on the downside and that is critical because this is for December and it suggests that people weren't spending enough on holiday sales shopping," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

The disappointing data pushed U.S. Treasury yields lower, sending financials and the S&P banking sector tumbling 1.8 percent.

The weak retail data also spurred more traders to bet that the Federal Reserve would cut key lending rates by the end of the year. [MMT/]

The data cast a shadow over optimism about the U.S.-China trade talks, which entered a higher level in Beijing.

Top White House economic adviser Larry Kudlow gave an upbeat assessment on the talks, but said a decision has not yet been made on whether to extend a March 1 deadline.

Meanwhile, the Congress is looking to end a dispute over border security on Thursday with legislation that would ignore President Donald Trump's request for funds to help build a U.S.-Mexico border wall.

At 9:51 a.m. ET, the Dow Jones Industrial Average was down 195.24 points, or 0.76 percent, at 25,348.03. The S&P 500 was down 17.92 points, or 0.65 percent, at 2,735.11 and the Nasdaq Composite was down 32.37 points, or 0.44 percent, at 7,388.00.

The fourth-quarter earnings season is slowly tapering off, and about 71 percent of the S&P 500 companies that have reported earnings have topped expectations.

But outlook for the current quarter is less rosy. Analysts' now estimate current-quarter profit to decline 0.3 percent, which would be the first loss since the second quarter of 2016.

Cisco Systems Inc rose 4.4 percent after the network gear maker's earnings beat estimates, driven by strength in its newer applications and security businesses.

Declining issues outnumbered advancers for a 2.11-to-1 ratio on the NYSE and for a 1.72-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and one new low, while the Nasdaq recorded 20 new highs and 15 new lows.

(Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila)