Retail stocks faltered on word from Federal Reserve chairwoman Janet Yellen that the central bank will likely raise benchmark interest rates earlier than expected.
Retail investors were less than thrilled about the change in stance, and the S&P 500 Retailing Industry Group stumbled by 0.4 percent to 1,4323.06. Higher interest rates make it more expensive to do everything from use a credit card to buy a dress or shoes or to borrow money to trade on Wall Street.
Among the fashion-related stocks that took a downward turn in the afternoon are Fossil Group Inc, off 8.4 percent to $17.12; Revlon Inc., down 5.9 percent to $32.05; Abercrombie & Fitch Co., down 6.3 percent to $12.48; Macy’s Inc., down 5.9 percent to $31.27; stein Mart Inc., down 3.5 percent to $3.54; and G-III Apparel Group Ltd., down 3.5 percent to $24.85.
Yellen said during a speech in Chicago that the Federal Open Market Committee intends to meet March 15 and 16 to discuss an incremental interest rate hike amid job gains and relatively tame inflation.
While an interest rate bump has been expected for some time, an increase was not widely expected to come so soon. The last benchmark increase was in December, to a range of 0.5 percent to 0.75 percent, which is still low by historical standards.
Yellen explained that the committee’s projections for the “appropriate path” for the federal funds interest rate “generally envision that economic activity will expand at a moderate pace in coming years, labor market conditions will strengthen somewhat further and inflation will be at or near 2 percent over the medium term.”
“In short, we currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect,” Yellen added.
However, she made clear that the committee is not completely decided on a rate increase, and noted that things will be reassessed should “unanticipated developments materially change the economic outlook.”
The central bank has previously mentioned raising the rate in 2017 in three installments of 0.25 percent.