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US Stocks Slip as Inflation Gets Worse 10/14 09:40
Worries about worsening inflation are weighing on the U.S. stock market
Wednesday and pulling Wall Street further from its record.
NEW YORK (AP) -- Worries about worsening inflation are weighing on the U.S.
stock market Wednesday and pulling Wall Street further from its record.
The S&P 500 slipped 0.4% and was on track for a fifth loss in the six days
since setting its all-time high. The Dow Jones Industrial Average was up 144
points, or 0.3%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was
0.6% lower.
Stocks felt pressure from rising yields in the bond market, where worries
grew after a report said U.S. consumers had to pay prices for fuel, food and
other costs of living last month that were 3.7% higher than a year earlier.
That means inflation accelerated from its 3.4% rate in August and was worse
than the 3.6% that economists expected.
Inflation has remained more painful than anyone would like since the economy
launched out of the crevasse created by the COVID-19 pandemic. It's breathed in
new life recently because of jumps in fuel prices caused by the war with Iran,
and the price for a barrel of Brent crude added 0.1% Wednesday to $105.77.
That has added to signals that the U.S. economy is still growing,
longstanding worries about fast-growing debt loads for governments and other
factors to send yields to their highest levels in years or even decades in bond
markets worldwide.
The centerpiece of the U.S. bond market, the 10-year Treasury, saw its yield
jump to 5.28% from less than 5.17% just before the inflation report's release.
That's a notable move for the bond market.
Yields on shorter-term Treasurys leaped even more as traders ratcheted up
their expectations for coming hikes to interest rates by the Federal Reserve.
The Fed last month raised the interest rate that it controls, which affects
very short-term loans, for the first time in three years in hopes of reining in
inflation. Higher rates do that by making it more expensive for everyone to
borrow money and slowing the overall economy.
Traders now see roughly a coin flip's chance that the Fed will raise the
federal funds rate at its next meeting in two weeks, up from the 22%
probability seen just a day earlier, according to data from CME Group.
"The consumer price index was a little hotter than expected, but not
scorching hot," said Brian Jacobsen, chief economic strategist at Annex Wealth
Management. "It was just hot enough to keep traders on edge."
Higher rates push downward on prices for stocks, and the main way companies
can offset that is to deliver bigger profits. That's exactly what analysts are
expecting, and it's how the S&P 500 has been able to set records despite the
many challenges weighing on Wall Street.
BlackRock rose 3% after the investment company reported stronger profit and
revenue for the summer than analysts expected. Customers poured a net $205
billion into BlackRock's funds, including iShares exchange-traded funds, from
July through September to bring its total assets under management to $15.5
trillion. BlackRock makes money by charging fees on those dollars.
But the high expectations for profit growth also mean companies will likely
get punished if they fall short of targets, which is what several other
financial companies did Wednesday morning.
Bank of America dropped 7.3% after reporting weaker profit and revenue for
the third quarter than analysts expected. The profit would have fallen short
even after ignoring the $1.2 billion in fines that the U.S. Treasury Department
announced late Tuesday for allegedly violating anti-money laundering and
sanctions laws.
State Street sank 7.5% after reporting weaker revenue for the latest quarter
than analysts expected, even though its profit was slightly above their
forecasts.
In stock markets abroad, indexes ticked higher in Europe following a weaker
finish in Asia. Indexes rose 0.5% in Paris and fell 0.9% in Shanghai for two of
the world's bigger moves.
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