U.S. stock indexes fell on Thursday as mixed economic data and hawkish comments from a Federal Reserve official fueled concerns that the central bank may not ease its aggressive policy tightening.
St. Louis Federal Reserve President James Bullard said rate hikes so far "have had only limited effects on observed inflation," and that the central bank needs to continue raising interest rates by at least another full percentage point.
Bullard's comments come as strong retail sales numbers on Wednesday stoked concerns that the Fed would keep raising borrowing costs, even as evidence of cooling inflation gives the central bank room to reduce the size of its rate hikes.
Several other Fed officials in recent days have also stressed the need to continue raising rates, albeit at a slower pace.
"The Fed is trying to make sure the market doesn't get too ahead of itself," said Tim Holland, chief investment officer at Orion Advisor Solutions. "They're trying to walk this rhetorical tightrope where in between meetings and big data points, they're reminding the market that they're still tightening."
Traders are now pricing in 89% odds of a 50-basis-point rate hike from the Fed in December and see terminal rate at around 5% in June 2023.
Data showed the number of Americans filing new claims for unemployment benefits fell last week, indicating a still tight labor market that allows Fed room for further tightening, denting market sentiment.
Wall Street closed lower on Wednesday as a grim outlook from Target Corp (TGT.N) sparked concerns about retailers heading into the crucial holiday season.
All major S&P 500 sectors traded lower on Thursday, with retail (.SPXRT) and consumer discretionary (.SPLRCD) falling 1.9% and 1.8%, respectively.
Shares of megacap tech and other growth companies including Apple Inc (AAPL.O), Amazon.com (AMZN.O) and Alphabet (GOOGL.O) were down between 0.9% and 3%.
The S&P 500 (.SPX) has gained more than 6% from its October closing lows on hopes of a less hawkish Fed, though the index has logged steep losses so far this year on fears of a recession stemming from the hefty interest rate hikes.
At 10:07 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 265.98 points, or 0.79%, at 33,287.85, the S&P 500 (.SPX) was down 45.82 points, or 1.16%, at 3,912.97, and the Nasdaq Composite (.IXIC) was down 140.01 points, or 1.25%, at 11,043.65.
Department store chain Macy's Inc (M.N) gained 11.2% and personal care products retailer Bath & Body Works Inc (BBWI.N) surged 17.3% after the companies raised their annual profit forecasts.
Kohl's Corp (KSS.N) slipped 3.2% after it withdrew its 2022 sales and profit forecasts, blaming an uncertain economic outlook and the departure of top boss Michelle Gass.
