Wall Street ends lower as hot inflation data raises odds of Fed rate hike

  • Fed fund futures now favor a 100 basis point rate hike in March
  • Twitter jumps after Hindenburg’s long position is revealed
  • Delta Airlines drops due to second-quarter profit loss
  • Indices down: Dow 0.67%, S&P 0.45%, Nasdaq 0.15%

NEW YORK (Reuters) – U.S. stocks closed slightly lower on Wednesday after investors digested hotter-than-expected U.S. inflation data, sparking fears that the Federal Reserve could raise key interest rates by as much as 100 basis points later this month. .

While all three major US stock indices bounced off their early-day lows, occasionally turning positive throughout the session, they were red at the closing bell.

Year-on-year consumer price growth accelerated to 9.1%, the hottest reading since November 1981, driven by an 11.2% monthly rise in gasoline prices. Read more

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Weeding out volatile food and energy prices, which have fallen since the report’s survey period, core CPI fell to an annualized rate of 5.9%.

“You would expect the CPI (report) that we saw to be a major risk-elimination event, but the market just shrugged it off,” said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky. “(Investors) were already expecting a very hawkish Fed and I don’t think that affects much except for the uncertainty and that has something to do with the reasons why the markets are not selling today.”

The report raised the odds that the Federal Reserve will raise interest rates more than the previously expected 75 basis points. Futures traders tied to the federal funds target rate priced the possibility of a further 100 basis point rise at the conclusion of the policy meeting later this month. Read more

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“If the Fed looks beyond the headline figure, it will see that commodity prices are already starting to pull back a little bit” since the CPI survey period, Mayfield said, adding that a 100 basis point rate hike based on the month-long CPI report June central bank policy can be put ‘behind the curve’.

As seen in the chart below, the core CPI appears to confirm that inflation has continued to decline from the March peak, but still has a long way to go before approaching the central bank’s 2% average annual inflation target:

The question of whether Fed policy tightening can rein in inflation without pushing the economy into recession appears to be turning into how severe the potential deflation will be.

Dow Jones Industrial Average (.DJI) The index fell 208.54 points, or 0.67%, to 30,772.79 Standard & Poor’s 500 (.SPX) It lost 17.02 points, or 0.45%, to 3,801.78 points, and the Nasdaq Composite Index (nineteenth) It fell 17.15 points, or 0.15%, to 11247.58 points.

Nine of the S&P 500’s 11 major sectors fell, with industrial sectors (.SPLRCI) and communication services (.SPLRCL) Experiencing the largest percentage decline, while the consumer discretion (.SPLRCD) Enjoy the biggest gains.

The second-quarter earnings season will take a full turn on Thursday, with JPMorgan Chase & Co and Morgan Stanley due to report results, followed by Citigroup and Wells Fargo & Co on Friday.

As of last Friday, analysts saw S&P annual aggregate earnings growth of 5.7% for the April-June period, down from expectations of 6.8% at the start of the quarter, according to Refinitiv.

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Delta Airlines shares (DAL.N) It fell 4.5% after the company’s second-quarter earnings missed expectations, although CEO Ed Bastian said strong travel demand would result in “meaningful” earnings for the full year. Read more

Wider S&P 1500 Airlines Index (.SPCOMAIR) It fell 1.7%.

Tesla Inc advanced 1.7%, while chip makers advanced (.sox) also acquired land.

Twitter Inc (TWTR.N) It jumped 7.9% after Hindenburg Research said it had taken a significant long position in the company’s stock. Read more

Declining issues outnumbered advanced shares on the New York Stock Exchange by 1.37 to 1; On the Nasdaq, the ratio was 1.08 to 1 in favor of declining stocks.

The S&P 500 hit a new 52-week high and 41 new low; The Nasdaq Composite recorded 16 new highs and 231 new lows.

Volume on US stock exchanges reached 10.66 billion shares compared to an average of 12.56 billion over the last 20 trading days.

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Stephen Kolb reports. Additional reporting by Amruta Khandekar in Bengaluru. Editing by Richard Chang

Our criteria: Thomson Reuters Trust Principles.

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