US open: Stocks open lower as lacklustre retail sales weigh on sentiment

US stocks headed south at the open on Thursday as optimism about Sino-US trade talks was offset by the largest retail sales drop in almost a decade.

At 1510 GMT, the Dow Jones Industrial Average was down 0.57% at 25,397.02, while the S&P 500 had lost 0.42% at 2,741.44 and the Nasdaq traded 0.14% lower at 7,410.16.

The Dow opened more than 175 points lower on Thursday as a far weaker than expected retail sales report sparked fears of a potential recession but also incredulity.

US retail sales showed a surprise slump in December, falling by the most since 2009, a few months after the end of the financial crisis.

According to the US Commerce Department, headline retail sales fell 1.2% in December, one of the most important months of the year for retailers. The figure missed consensus forecasts for growth of between 0.1% and 0.2%, and was well below November’s 0.1% improvement.

Stripping out volatile elements such as food, energy and building materials, core retail sales dropped 1.7% against a 1% revised increase in November.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, called the data "unbelievable".

He added: "These numbers are astonishing, and impossible to square with the Redbook chain store sales survey, which reported surging sales in December and a record high in the week of Christmas, on the back of the plunge in gasoline prices.

"These data are so wild that we have to expect hefty upward revisions. But if they stand, they are very unlikely to be representative of the trend over the next few months. The consumer is no longer enjoying tax cuts or falling gas prices, but that’s no reason to expect a rollover."

Elsewhere, Oanda analyst Craig Erlam said Donald Trump's claim on Wednesday that negotiations were going "very well" and reports that a 60-day extension was being considered were "encouraging".

"This was always, realistically, the best possible outcome of these initial talks and I think we have to be pleased that this means two more months without new tariffs. The ultimate goal is for previous tariffs to be removed entirely but this is another important step towards that," Erlam said.

Meanwhile, another partial government shutdown looked set to be avoided as Trump prepared to sign border-security legislation.

"The Senate is expected to vote on the proposed legislation today and this will be followed in short order by the House," said Rabobank.

"A provision to provide back pay to federal contractors who did not receive pay during the most recent shutdown will not be included as [an] agreement between the Democrats and Republicans on the issue could not be reached."

In other data news, business inventories fell 0.1% across the US in November, according to the Commerce Department.

Sales dropped 0.3% in the month, a report which had been delayed by the government shutdown revealed.

The ratio of inventories to sales was flat at 1.35.

Lastly, initial jobless claims data showed the number of Americans filing for unemployment benefits unexpectedly rose last week, while the monthly average hit its highest level in a year, according to figures from the Labor Department. Jobless claims increased by 4,000 from the previous week's revised level to 239,000, versus expectations for a level of 225,000. The previous week's level was revised up by 1,000 to 235,000.

Meanwhile, the four-week moving average came in at 231,750, up 6,750 from the previous week's average, which was revised up by 250 to 225,000. This marks the highest level for this average since 27 January last year, when it was 234,000.

In corporate news, mattress manufacturer Tempur Sealy was up 5.27% in early trade as its fourth-quarter profit missed expectations.

Coca-Cola was down 6.88% at the bell after the release of weaker-than-expected fourth-quarter revenue, while Avon shares were ahead 0.45% despite the cosmetics company posting a fourth-quarter loss and falling short in terms of revenue.