Wall Street Opens Mixed as Cold Snap Hits Retail Sales; Dow Down 40 Pts

U.S. stock markets opened mixed on Tuesday, as a weaker-than-expected retail sales report for February cooled the enthusiasm toward beaten-down cyclical stocks, leaving the tech sector to outperform.

By 9:35 AM ET (1435 GMT), the Dow Jones Industrial Average was down 42 points or 0.1%, while the S&P 500 was up 0.1% and the Nasdaq Composite was up 0.7%.

Earlier, the Commerce Department said U.S. retail sales had fallen 3.0% in February from January, while core retail sales had fallen 2.7%. Both numbers were well below expectations of a more modest drop, but were affected by the prolonged cold snap across much of the country.

Additionally,industrial production fell 2.2% from January, affected by similar factors.

The numbers came ahead of the Federal Reserve’s two-day policy meeting which begins later Tuesday, but the distortion from the extreme weather reduced the chance of their having any meaningful impact on the thinking of the Fed’s policy-making committee. Analysts expect the Fed to leave its bond purchases and interest rates unchanged, but will be alive to any change in guidance as to when the extraordinary level of monetary stimulus will be withdrawn.

Another important question to be decided at the Fed meeting will be whether or not to extend an exemption from capital rules to the banking sector that is due to expire at the end of the month. If the Fed decides to reintroduce the Supplementary Leverage Ratio as a binding constraint on banks, it could not only affect their freedom to make payouts to shareholders, but also their ability to absorb the vast amounts of bonds being sold by the Treasury to finance the $1.9 trillion stimulus plan.

The 10-year Treasury yield, a proxy for long-run inflation expectations, dipped below 1.60% in early trade in New York as the market settled down to await the meeting’s results.

On a generally quiet day for corporate news flow, Ford Motor (NYSE:F) stock fell 2.7% after it forecast a hit of up to $2.5 billion from the semiconductor shortage affecting the global car industry, while Volkswagen (OTC:VWAPY) ADRs rose 5.8% to a six-year high after the company raised its target for profitability and for electric vehicle sales. Facebook (NASDAQ:FB) stock rose 2.0% after it ended a dispute over content in Australia by agreeing to pay Rupert Murdoch’s News Corp (NASDAQ:NWSA) in future for the news it carries.

Despite a couple of days of tech underperformance, Bank of America’s weekly fund manager survey still named tech as the most crowded trade in town, along with bitcoin and ESG-themed investments.

“As the recovery picks up speed, the rotation out of concept growth stocks may have further to go,” said Min Lan Tan, chief investment officer for UBS Global Wealth Management, in a blog post Tuesday. “Investors should tilt their equity exposure toward stocks that are likely to benefit from higher growth and a steeper yield curve, including financials, industrials, and energy stocks.”