Markets Face Turbulence Amid Retail Sales Dip and AI Spending Surge

The S&P 500 and Nasdaq faced declines on Tuesday as investors processed lackluster retail sales and anticipated key labor market data. Alphabet shares weighed down the communication services sector after announcing a $20 billion bond sale. Concerns mount over tech giants' projected AI-related expenditures totaling hundreds of billions by 2026.

Retail sales remained stagnant in December, contrary to economists' predictions of 0.4% growth. This unexpected flatline hints at a slower consumer spending trajectory entering the new year, potentially influencing the Federal Reserve's monetary policy decisions.

Ahead of a closely monitored nonfarm payroll report, traders are cautious. White House economic adviser Kevin Hassett suggested future job gains could dwindle due to reduced labor force growth and higher productivity from AI advancements. Despite some sectors' struggles, stocks like Disney and Home Depot aided the Dow's modest rise.