US stocks drift to a mixed finish as yields fall after a discouraging report on US shoppers

Wall Street stocks wavered Tuesday as investors digested mixed corporate earnings and a disappointing retail sales report that heightened expectations for Federal Reserve interest rate cuts later this year.

The S&P 500 fell 0.3% to 6,941.81 after briefly approaching its all-time high set earlier this month. The Dow Jones Industrial Average added 52.27 points, or 0.1%, reaching 50,188.14 and setting another record. Meanwhile, the tech-heavy Nasdaq composite declined 0.6% to 23,102.47.

Bond markets reacted more strongly to the day’s economic data, with the 10-year Treasury yield dropping to 4.14% from 4.22% following a weaker-than-expected retail sales report. The government data showed U.S. consumer spending remained flat in December instead of showing the modest growth economists had anticipated.

The retail report raised concerns about slowing momentum in consumer spending, which drives approximately 70% of U.S. economic activity. This data comes at a crucial time, with additional economic indicators due later this week—the monthly unemployment report on Wednesday and consumer inflation figures on Friday—that will further inform the Federal Reserve’s interest rate decisions.

“Consumer spending has been the backbone of this economy throughout the post-pandemic recovery,” said Marcus Reynolds, chief economist at Harvest Financial Partners. “Any sustained weakness here could accelerate the timeline for Fed easing.”

Following Tuesday’s retail data, traders increased bets on the Fed implementing three or more rate cuts this year, though most still expect two reductions as the more likely scenario, according to CME Group data.

Corporate earnings continued to drive individual stock movements. Beverage giant Coca-Cola slipped 1.5% after reporting quarterly revenue that missed analysts’ expectations. The company’s forecast for underlying growth in the coming year also fell short of some analysts’ projections.

Financial services firm S&P Global dropped 9.7% after issuing disappointing profit guidance for the upcoming year. The company, known for its stock indexes, has struggled with concerns that competitors utilizing artificial intelligence might lure away customers from its data services. The stock has already declined 15% year-to-date.

On the positive side, toymaker Hasbro climbed 7.5% after exceeding profit and revenue expectations in its latest quarter. The company attributed its strong performance particularly to its “Magic: The Gathering” game franchise and announced plans to return up to $1 billion to shareholders through stock buybacks.

Chemical manufacturer DuPont rose 4.9% after beating quarterly expectations and providing an optimistic profit forecast for 2026 that surpassed analysts’ projections.

In merger and acquisition news, Warner Bros. Discovery shares increased 2.2% after Paramount sweetened its takeover offer. Paramount proposed adding 25 cents per share for each quarter that passes without regulatory approval beyond the end of this year, demonstrating confidence in the deal’s eventual approval. Paramount also committed $2.8 billion to help Warner Bros. Discovery exit its existing agreement with Netflix. Paramount’s stock added 1.5%, while Netflix shares rose 0.9%.

Overseas, Japan’s Nikkei 225 rallied for a second consecutive day, jumping 2.3% to another record high. Investors there are optimistic that Prime Minister Fumio Kishida will be able to implement tax cuts and other economic stimulus measures with support from the newly elected parliament. Other Asian markets posted more modest gains, while European indexes showed mixed results.

Analysts note that U.S. markets remain near record levels largely on expectations that the Federal Reserve will begin cutting interest rates later this year. While lower rates typically stimulate economic growth, they must be balanced against inflation concerns, making this week’s upcoming economic data particularly significant for market direction.