What happened

Shares of consumer goods stocks Nike (NKE -2.85%), Etsy (ETSY 1.62%), and Chewy (CHWY 1.04%) were plunging today, falling 2.8%, 4.6%, and 6.2%, respectively, as of 11 a.m. ET.

It wasn't a good day for growth stocks or consumer stocks, as the Federal Reserve stuck to its hawkish tone yesterday, even as today's November retail sales numbers saw a large month-over-month decline.

Unfortunately, these three stocks are each a combination of growth-oriented consumer names, and were therefore feeling the heat on Thursday. 

So what

Today, the U.S. Census Bureau released its November retail sales figures, encompassing retail stores, online sales, and restaurants. The figure showed a large 0.6% month-over-month drop, which is the largest monthly decline in a year and much more than the 0.1% drop forecast by economists. The big decline reversed the unexpectedly strong October retail sales growth of 1.3%, so perhaps many consumers decided to do their holiday shopping early this year.

Still, the composition of the decline showed inflation taking a bite, as consumers spent less on discretionary items such as electronics, sporting goods, and clothing, and more on staples such as food, healthcare and restaurants. That seems to be a bad omen for Nike and Etsy's fourth-quarter results, although we won't know that for sure until they report earnings.

While Chewy, as a pet food e-commerce leader, could be considered more of a consumer staple than either Nike sneakers or goods bought on Etsy, it also doesn't make material profits. Chewy has made a slight loss on its trailing-12-month net income -- although last quarter, Chewy did operate around breakeven.  

However, high-multiple or unprofitable stocks are also taking it on the chin today, as yesterday's Federal Reserve meetings showed Fed governors have revised upwards their estimate of where the federal funds rate will land next year, when compared with the September meeting. That's despite two straight inflation reports that came in softer than expected. So some might fear the Fed is hiking too far, and may cause an unnecessary recession.

Yet the Fed may feel emboldened to keep raising rates anyway, as long as the labor market remains strong. Thursday also saw unemployment claims come in lower than expected, at 211,000 versus 230,000 forecast, pointing to a still-strong labor market. This is another "good news is bad news" item that means the Fed may have to continue raising rates, even as retail sales remain weak.

Nike and Etsy aren't exactly cheap stocks either -- Nike trades at 31 times earnings and Etsy at 46 times. Thus, the combination of a more hawkish Fed, despite retail sales coming in lower, is causing some serious concerns for investors in the retail space today. 

The macroeconomic overhang is so strong today that it's even countering a positive analyst note on Nike. Today, Deutsche Bank analysts maintained their "outperform" rating on the stock, while raising their forward price target from $99 to $126.

Now what

The state of the economy and the path of interest rates remain highly uncertain today, with some data pointing to a softening economy, while other data points to continued strength. So, it's not surprising that the market is highly volatile as it tries to figure out the state of the economy and path of interest rates. Given the recent rally since October, it's perhaps not surprising to see a pronounced sell-off when a data point disappoints.

On the other hand, inflation does appear to be falling. If December's numbers, to be reported in January, comes in softer than expected, that would be three straight months of lower-than-expected inflation, which may be hard for the Fed to ignore.

Now more than ever, it's important to pick stocks one likes for the long term, and which trade at reasonable valuations -- because the near term looks to be quite unpredictable.