Wall St set for lower open as retail sales data stokes rate concerns

By Amruta Khandekar and Shristi Achar A

(Reuters) – Wall Street’s main indexes were set to open lower on Tuesday after a sharper-than-expected rise in U.S. retail sales stoked concerns the Federal Reserve could keep interest rates higher for longer.

The Commerce Department’s report showed retail sales grew 0.7% last month against expectations of a 0.4% rise, suggesting the U.S. economy remains strong.

Data for June was revised higher to reflect sales growth of 0.3%, compared with 0.2% reported earlier.

The yield on the 10-year benchmark Treasury note also climbed to hit a near 10-month high, and was last up at 4.27%. [US/]

Traders’ odds of a pause on hikes by the Fed at its September meeting fell to 86.5% from 89% before the data.

“Given the fact that we are so hyper-vigilant about the Fed and what their next step will be in September, it isn’t surprising that the market reacted with jitters,” said Peter Andersen, founder of Andersen Capital Management in Boston.

“The retail sales number might indicate that the Fed would continue to raise rates.”

Rising Treasury yields have pressured equities after hotter-than-expected producer prices data last week fueled fears the Fed could keep rates higher for longer than previously anticipated.

Nvidia (NASDAQ:) was an outlier among major technology and growth stocks, rising 2.2% in premarket trading on Tuesday after UBS and Wells Fargo (NYSE:) lifted their price targets on the stock.

Tesla (NASDAQ:) slipped 0.7% after the electric automaker introduced two cheaper versions of its Model S sedan and Model X SUV in the United States.

U.S.-listed shares of Chinese companies JD (NASDAQ:).Com, Alibaba (NYSE:) Group and Bilibili (NASDAQ:) slid between 0.7% and 1.2% following another round of disappointing economic data from China which prompted Beijing to cut key policy rates.

At 8:44 a.m. ET, were down 253 points, or 0.72%, were down 27.5 points, or 0.61%, and were down 85.75 points, or 0.56%.

Among other stocks, General Motors (NYSE:) fell nearly 1% in premarket trading after Berkshire Hathaway (NYSE:) cut its stake in the automaker.

Warren Buffett’s Berkshire disclosed a new investment in homebuilder D.R. Horton, lifting its shares up 2.2%.

JPMorgan Chase (NYSE:), Bank of America (NYSE:) and Wells Fargo slipped between 1.4% and 1.8% on a report that ratings agency Fitch could downgrade big U.S. banks.