NEW YORK (`) – Stock prices fell on Wednesday as Wall Street braced for a much-anticipated inflation report due out soon.
The S&P 500 fell 31.67, or 0.7%, to 4,467.71 for its sixth decline in the past seven days. The Dow Jones Industrial Average was down 191.13, or 0.5%, to 35,123.36 and the Nasdaq Composite was down 162.31, or 1.2%, to 13,722.02, with big tech stocks leading the declines.
Stocks have cooled off in August since rising 19.5% for the first seven months of the year. There are several reasons for the small drop, including criticism that Wall Street was too quick to reach a consensus that inflation will continue to cool, the economy will continue to grow and that the Federal Reserve has already completed its rate hikes.
A report on Thursday will provide an important clue as to how valid those hopes are. The US government is due to release the latest monthly update on inflation, which is being felt by consumers across the country, and economists expect an acceleration to 3.3% in July from 3% in June.
Such a reading would be a sharp drop from last summer’s peak of more than 9%, but economists are calling it a recent improvement Bringing inflation down to the Fed’s 2 percent target might be the hardest part.
Fed officials have repeatedly said of late that their forthcoming decisions on interest rates will depend on what the data tells them, and they have referred to reports on inflation and the jobs market in particular.
“As risks become more two-sided, Fed officials are beginning to shift focus to how long they can keep rates stable at sufficiently restrictive levels,” said economists at Deutsche Bank.
A much worse-than-expected reading on Thursday could prompt fears that the Fed’s job in fighting inflation is far from over and that it may have to hike interest rates further. At the very least, it could persuade the Fed to keep interest rates high for longer than expected.
High interest rates slow inflation by weakening the overall economy and weighing on investment prices. The Fed has already cut interest rates to their highest level in more than two decades. Because interest rate hikes have historically taken a long time to feed through to the economy as a whole, the risk of a recession remains.
Meanwhile, companies continue to release spring earnings reports, mostly better than analysts had expected.
Axon Enterprise, the company behind Tasers and Axon body cameras, rose 14.1%, making it the biggest gainer in the S&P 500. The company reported earnings for the spring that were significantly higher than analysts had expected.
Akamai Technologies also contributed to the market leadership after beating both earnings and revenue forecasts. The stock rose 8.5%.
outside of income, Penn Entertainment up 9.1% after the company announced it was paying $1.5 billion for the exclusive rights to rebrand its sports betting app as ESPN.
On the losing side of Wall Street was Lyft, which fell 10%. The ride-sharing company reported better-than-expected results for the most recent quarter, and its guidance for the current quarter also beat forecasts. However, analysts highlighted some cautious comments from the company on year-end expectations.
WeWork plunged 38.6% to 13 cents after raising significant doubts about its ability to stay in business as the company burns cash. The workspace-sharing company has had some spectacular ups and downs in its history and reported a bigger-than-expected loss for the spring.
Nvidia was the largest weight in the S&P 500, down 4.7%. The chipmaker is among stocks that have soared this year on Wall Street’s hype surrounding artificial intelligence technology, raising concerns that they went too far.
Other big tech stocks also fell, and their movements have a larger impact on the S&P 500 because of their sheer size. Amazon fell 1.5%, Microsoft fell 1.2%, and Tesla lost 3%. The threat of high interest rates tends to hit technology and other high-growth stocks hardest.
In the bond market, the yield on the 10-year government bond fell from 4.03% to 4.00% late Tuesday. This rate of return helps set interest rates on mortgages and other loans.
The two-year Treasury yield, which is more in line with expectations of Fed action, rose to 4.80% from 4.76%.
On the stock markets abroad, indices were slightly higher in Europe and mixed in Asia. A report showed that consumer-level prices in China were lower in July than a year earlier.
China was supposed to help prop up the global economy after lifting anti-COVID restrictions, but its recovery has fallen short of expectations. However, the weakness has also meant that inflation in the rest of the world has come under some pressure.
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` business journalists Yuri Kageyama and Matt Ott contributed.
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