Weak U.S consumer spending spells caution

Customers visit Macy’s Herald Square store on December 17, 2023 in New York City. 

Kena Betancur | Corbis News | Getty Images

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What you need to know today 

Markets rally
Wall Street ended Thursday higher, with the S&P 500 setting a new record high despite fresh data showing retail sales dropped 0.8% in January. The Dow Jones Industrial Average also saw a late-day rally, adding over 300 points. The tech-heavy Nasdaq Composite gained 0.3%.

Riding on Nvidia’s success
A filing showed Nvidia took stakes in a handful of public companies. Shares of most of those artificial intelligence companies soared on Thursday, reflecting investors’ strong interest to ride on Nvidia’s AI growth story.

Forget Tesla look at Ford
Ford CEO Jim Farley told investors to forget about Tesla as the future of the auto industry, urging them to instead focus on Ford’s “Pro” fleet business. “If you’re looking for the future of the automotive industry, stop looking at FSD and Tesla. Look at Ford Pro. It’s got half a million subscribers with 50% gross margin,” he said.

Putin prefers Biden
Russian leader Vladimir Putin said Joe Biden would be a better president for Russian relations than Republican frontrunner Donald Trump. ″[Biden] is more experienced and more predictable. He is an ‘old school’ politician. But we will work with any U.S. leader, elected by the people of America,” Putin said in an interview. 

[PRO] Asia’s AI standouts
Given the artificial intelligence boom, Morgan Stanley picked stocks it called “underappreciated beneficiaries” in Asia-Pacific. The biggest share of AI beneficiaries in Asia and emerging markets were found in IT and communications, the bank said.

The bottom line

Americans tightened their spending at the start of this year after the usual holiday season splurge.

Consumer spending saw a large drop, declining 0.8% in January from a month earlier. The bigger-than-expected plunge came after a robust round of spending in December, which was downwardly revised to a 0.4% gain. 

The weak retail sales data raises fresh doubts on the strength of U.S. consumer activity, which accounts for roughly two-thirds of economic growth.

Consumer spending has been holding up remarkably despite higher borrowing costs and persistent inflation. And the U.S. economy has proven to be far more resilient even as others, such as Japan and the U.K., showed weakness and slipped into technical recessions.

Still, there were other positive economic indicators that offer a glimmer of hope.

Jobless claims released Thursday continued to surprise to the downside despite layoffs from major companies in recent weeks. It reflects underlying strength in the labor market, another critical factor for economic growth.

There was also good news on the manufacturing front, as regional surveys in the Federal Reserve’s Philadelphia and New York districts both came in better than expected for February.

Given the mixed economic data, Wall Street’s focus will turn to Friday’s producer price index — which is usually not given as much attention. But now it will be, given the big hit to CPI on Tuesday.

— CNBC’s Jeff Cox contributed to this story.

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