- Dow, S&P and Nasdaq extend losses
- Higher oil price stokes fears of renewed rise in inflation
- US services sector expands faster-than-expected
4:18pm: Apple, Nvidia each lose 3%
The Dow closed Wednesday down 199 points, 0.6%, at 34,443, the Nasdaq Composite declined 148 points, 1.1%, to 13,872 and the S&P 500 slid 31 points, 0.7%, to 4,465. The small-cap Russell 2000 index lost 6 points, 0.3%, to 1,874.
The Nasdaq lost ground for the third consecutive session as Nvidia and Apple each saw shares fall more than 3%.
The Institute for Supply Management’s services purchasing managers’ index notched a reading of 54.5 in August, up from 52.7 in July. Economists had predicted a pullback to 52.5.
The stronger-than-expected result seems to have spooked investors.
“The ISM reinforced all the concerns that have been bedeviling stocks for weeks – higher yields undercut stock valuations, robust growth [and] sticky inflation keep pressure on the Fed, healthy growth gives a further bid to oil,” said Vital Knowledge’s Adam Crisafulli in a Wednesday note.
12:00pm: Stocks extend losses after strong ISM report
US stocks extended losses by midday as a strong services sector reading and renewed inflationary concerns adding to jitters that further rate rises may lie ahead.
At midday, the Dow Jones Industrial Average was down 206.55 points, 0.6%, at 34,435.42, the S&P 500 was down 37.24 points, 0.8%, at 4,459.59 and the Nasdaq Composite was down 158.22 points, 1.1%, at 13,862.73.
The US services sector expanded for the eighth successive month, beating economists’ projections for slower growth in the largest portion of the country’s economy.
The Institute for Supply Management’s services purchasing managers’ index notched a reading of 54.5 in August, up from 52.7 in July. Economists had predicted a pullback to 52.5.
All four subindexes of the PMI increased from the prior month, with employment ramping up the most by 4 points.
Economists at ING Economics said the figures were "surprisingly strong."
"There are doubts as to how sustainable this will be, but the rise in the inflation component will keep hawks wary even if they do indeed go with the majority and vote for a pause on rate hikes in two weeks," ING added.
The dollar continued its recent strong run trading at $1.2496 against sterling and $1.0712 against the euro.
9:40am: US stocks head lower on renewed rate rise concerns
US stocks opened lower on Wednesday as inflation worries resurfaced raising the spectre of inflated interest rates for some time to come.
Shortly after the opening bell, the Dow Jones Industrial Average was down 112.99 points, 0.3%, at 34,528.98, the S&P 500 was down 17.37 points, 0.4%, at 4,479.46 and the Nasdaq Composite fell 49.18 points, 0.4%, at 13,971.78.
The rise in oil prices prompted concerns of hotter-than-expected inflation reports ahead sugesting interest rates could rise further, or stay higher, for longer.
Neil Wilson at Markets.com said: "Remember higher oil means people worry about higher inflation and credit."
"The Fed’s job may not be done."
Federal Bank of Boston President Susan Collins said policymakers will need to be patient as they assess economic data to figure out their next steps and that further tightening may still be required, based on what the trends show.
The CME Fed Watch tool puts a 93% chance that the Fed will leave rates unchanged at its next meeting and a 55% likelihood it will do the same in November.
Still to come on Wednesday, the ISM services sector report and the Fed's Beige Book.
Stocks on the move include streaming service Boku which surged more than 11% after sharing a slew of cost-cutting measures, including layoffs.
7:00am: Rising oil price stokes fears of renewed inflation
US stocks are expected to open lower on Wednesday as a spike in the oil price sparked fears of a renewed jump in inflation.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% lower, while those for the S&P 500 fell 0.2%, and contracts for the Nasdaq 100 futures were down 0.3%.
The Dow finished close to 200 points, or roughly 0.6%, lower on Tuesday, while the S&P 500 and Nasdaq Composite slipped 0.4% and nearly 0.1%, respectively.
Part of the downward pressure came from oil prices, which rose to their highest level since November after Saudi Arabia and Russia extended their voluntary supply cuts.
But on Wednesday, West Texas Intermediate futures slipped 0.7% to $86.07.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said the rise in oil prices will “cause another headache for central bankers.”
“Energy prices are big inflationary drivers, and just at the time when the price spiral appears to be moving more obediently downwards, high crude prices could cause upset.”
Deutsche Bank’s Jim Reid said the move “has already had a clear impact on gasoline/petrol prices, and is expected to lead to some hot CPI reports in August, so the risk is that this further run-up will only add to those pressures in the September/October numbers.”
“This could pose a tricky dilemma at a time when several growth indicators are already turning lower, particularly in Europe, since central bankers will have to decide whether to focus on above-target inflation, or whether they should ease up on rate hikes given the downturn in growth.”
“It’s true that this won’t directly show up in core inflation since it's energy, but the risk is you ultimately get second-round effects in other categories,” he added.
Otherwise, the release of the Beige Book late in the session will attract investor interest.