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

U.S. equities traded mixed as a disappointing retail-sales report (December spending roughly flat versus November, below expectations) pushed Treasury yields lower—10-year Treasury yield fell to 4.14% from 4.22%—and increased bets on Fed rate cuts later this year. The S&P 500 slipped 0.3% to 6,941.81 while the Dow rose 52.27 points to a record 50,188.14 and the Nasdaq fell 0.6% to 23,102.47. Corporate results were uneven: Coca-Cola missed revenue estimates and fell 1.5%, S&P Global plunged 9.7% on a weak profit outlook, Hasbro jumped 7.5% after beats and announced up to $1 billion in buybacks, and DuPont beat and raised 2026 profit guidance; Warner Bros. Discovery rallied on an increased Paramount takeover offer and related deal payments. The combination of weak consumer data and mixed earnings creates uncertainty for Fed timing and near-term market direction.

Analysis

Market structure: The retail-sales miss pushes clear winners (event-driven and capital-return stories like HAS and M&A targets such as WBD/NFLX) and losers (data/analytics providers with secular threats like SPGI and incumbents that missed cadence like KO). Weak consumer demand reduces pricing power for broad discretionary categories but concentrates upside on franchises with strong IP and buybacks; Hasbro’s $1bn buyback amplifies EPS leverage in a low-growth consumer patch. Bond market reaction — 10-year down to ~4.14% — signals the market is pricing 2–3 Fed cuts within ~6–12 months, supporting duration and growth multiple expansion if data flow weakens further.

Risk assessment: Tail risks include a policy shock (Fed keeps rates unchanged or hikes if inflation re-accelerates — yields +50–100bps, equities -8–15%), regulatory blockage of WBD deals, and rapid AI-driven client loss at SPGI. Immediate catalysts are unemployment (48 hrs) and CPI (72 hrs); short-term (weeks) earnings/guidance will reprice names, while multi-quarter consumer pullback risks capex and cash-flow for buybacks. Hidden dependency: buyback-fueled EPS can mask underlying demand erosion — if retail momentum worsens, multiple compression could be rapid.

Trade implications: Implement a size-constrained tactical book: establish 2–3% long in HAS (equity or 6–9 month call spread) with stop-loss -15% and target +25% on buyback/MTG tailwinds; add 1–2% short in SPGI via 3-month put spread (10–15% OTM) to express secular data risk. Add 3–5% duration via TLT or 7–10y futures to capture ~25–50bps further yield compression; trim if CPI prints >0.4% M/M. Event pair: long WBD (1%) vs short NFLX (1%) around deal resolution windows; hedge exposure around regulator decisions.

Contrarian angles: Consensus expects multiple cuts; markets may be underestimating the chance of sticky inflation that keeps rates higher — prepare to reverse duration/levered equity positions if CPI surprises >0.3% M/M. SPGI’s selloff may be overdone if competitive AI penetration is gradual; consider tactical call-buy if management offers buybacks or stabilizing guidance. Finally, M&A optionality (Paramount/WBD) creates asymmetric, calendar-driven returns — size these as event trades, not core longs.

Key Decisions for Investors

• Establish a 2–3% long position in HAS (NYSE:HAS) using equity or a 6–9 month call spread (e.g., buy ATM, sell +25% strike) targeting +25% upside; set stop-loss at -15% to limit exposure if consumer softness widens.
• Initiate a 1–2% short in S&P Global (NYSE:SPGI) via a 3-month put spread (10–15% OTM) to hedge data-service secular risk; add if guidance is lowered on next earnings or if share price rallies back >10% intraday.
• Allocate 3–5% to duration (TLT or 7–10y Treasury futures) to capture further yield compression if CPI/unemployment confirm slowing demand; reduce position if CPI prints M/M >0.3% or 10-year yield closes >4.50% on a 3-day basis.
• Enter a 1% event-driven long in WBD and offset with a 1% short in NFLX around deal milestones; size as a pair trade and liquidate within 1–3 months of regulatory clarity or if Paramount increases fee/offer terms materially.
• Avoid increasing exposure to broad consumer staples like KO until two consecutive monthly retail or CPI prints show stabilization; consider a tactical short or put protection (90-day) on KO if revenue/margin guidance is revised downward.