- US CPI stronger-than-expected
- China denies issuing iPhone ban
4:10pm: CPI report 'interrupts run of good news,' analyst says
The Dow closed Wednesday down 70 points, 0.2%, at 34,576, the Nasdaq Composite added 40 points, 0.3%, to 13,814 and the S&P 500 improved 6 points, 0.1%, to 4,467. The Russell 2000 index slid 15 points, 0.8%, to 1,841.
Investors digested consumer prices rising 3.7% year on year in August, according to the Bureau of Labor Statistics, up from 3.2% in July and higher than consensus forecasts of 3.6%.
“This report interrupts the run of good news [and] makes it more difficult to talk a happy game about inflation,” said Vincent Reinhart, chief economist at Dreyfus and Mellon. “It doesn’t matter for the upcoming FOMC meeting’s results. They’re not going to act. They have not signaled action. Market participants do not expect action. And that’s because they’ve shifted down the pace of tightening.”
Meanwhile, the day after the iPhone 15 Launch event, shares of Apple fell 1.2% to $174.21.
12:00pm: Stocks hold firm as investors digest inflation figures
US stocks held modest gains around lunchtime with enthusisam limited by the slightly stronger-than-expected inflation figures.
At midday, the Dow Jones Industrial Average was up 31.27 points, 0.1%, at 34,677.26, the S&P 500 was up 8.77 points, 0.2%, at 4,470.67 while the Nasdaq Composite rose 48.54 points, 0.4%, to 13,822.16.
Chris Beauchamp at online trading platform IG said: "While US prices have risen at a faster pace over the last month, stocks have nonetheless taken comfort from the drop in annual core inflation. There was plenty of nervousness ahead of the report, with stocks in fragile form, but a more confident tone has emerged."
American Airlines nosedived 4.1% after it cut third-quarter guidance, citing rising jet fuel costs and price cuts.
"Fuel prices have increased considerably since the company’s initial third-quarter guidance issued on July 20, 2023,” American Airlines said.
“The company now expects to pay an average of between $2.90 and $3.00 per gallon of jet fuel in the third quarter (up from previous guidance of $2.55 to $2.65)."
9:40am: Stocks forge ahead despite strong inflation print
US stocks climbed on Wednesday, shrugging off stronger-than-expected inflation figures which economists believe won't change the mindset at the Federal Reserve.
Shortly after the opening bell, the Dow Jones Industrial Average was up 93.39 points, 0.3%, at 34,739.38, the S&P 500 was up 11.59 points, 0.3%, at 4,473.49 while the Nasdaq Composite was up 44.45 points, 0.3%, at 13,818.06.
Consumer prices rose 3.7% year on year, according to the Bureau of Labor Statistics, up from 3.2% in July and higher than consensus forecasts of 3.6%. On a monthly basis, prices increased 0.6%, in line with expectations.
More than half of the monthly increase was driven by a jump in petrol prices.
Core inflation, which strips out volatile food and energy costs, was also above expectations with a month-on-month gain of 0.3% (consensus 0.2%) bringing the annualised rate down to 4.3% (consensus) from 4.7% in July.
Andrew Hunter, deputy chief US Economist at Capital Economics thinks the Fed will "look through" the 0.6% m/m jump in headline CPI in August "as it was driven by the recent rally in energy prices."
"Although core prices also rose by a slightly stronger 0.3% m/m, there is little in the report to convince Fed officials that they need to raise interest rates further," he felt.
John Leiper at Titan Asset Management said the figures contained "mixed messages," in part due to rising gasoline prices which bolstered the headline number.
He thinks it’s tempting to read too much into the month-on-month data in this "hyper data dependent central bank age but on balance I think this doesn’t move the needle too much."
"We still expect the Fed to hold on rates at the next meeting," he said.
Apple was in the spotlight following the iPhone 15 launch event and as China said on Wednesday that it hasn't released official regulations to stop using foreign electronic devices.
"China hasn't issued any laws, regulations or policy documents banning purchase or use of foreign phones including Apple's iPhones," said Mao Ning, spokeswoman at China's foreign ministry, at a daily briefing.
The Wall Street Journal previously reported that some staff at government agencies were given instructions to stop using iPhones and other foreign-branded devices for work or bring them into the office, according to people familiar with the matter.
Shares eased 0.2%.
Citigroup Inc (NYSE:C) shares rose 0.8% as CEO Jane Fraser announced a corporate reorganisation, saying the move would cut down management layers and accelerate decisions.
Fraser said in a release that Citigroup would be divided into five main business lines that report directly to her.
Previously, the firm had two main divisions catering to consumers and large institutional clients.
Moderna Therapeutics Inc (NASDAQ:MRNA) climbed 5.5% after the FDA approved its latest COVID vaccine boosters and as the company hosts an Investor Day event today.
8:45am: US inflation stronger-than-expected in August
The US inflation rate was stronger than expected in August, according to new data posing a fresh dilemma for the Federal Reserve ahead of next week’s policy meeting.
Consumer prices rose 3.7% year on year, according to the Bureau of Labor Statistics, up from 3.2% in July and higher than consensus forecasts of 3.6%. On a monthly basis, prices increased 0.6%, in line with expectations.
More than half of the monthly increase was driven by a jump in petrol prices.
Core inflation, which strips out volatile food and energy costs, was also above expectations with a month-on-month gain of 0.3% (consensus 0.2%) bringing the annualised rate down to 4.3% (consensus) from 4.7% in July.
The index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase.
Also contributing to the August monthly increase was continued advancement in the shelter index, which rose for the 40th consecutive month.
The energy index rose 5.6% in August as all the major energy component indexes increased.
The food index increased 0.2% in August, as it did in July and the index for food at home increased 0.2% over the month while the index for food away from home rose 0.3% in August.
Stock futures have extended their falls while the
7:00am: Futures point lower but it's all about inflation
US futures are pointing to a weak start on Wall Street as investors await the latest inflation print amid worries rising oil prices might spark a fresh wave of pricing pressures.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.2% lower, while those for the S&P 500 fell 0.2%, and contracts for the Nasdaq 100 futures were down 0.2%.
“All eyes are on US inflation numbers set to be released later today as this data is crucial to the Federal Reserve’s decision-making on whether to keep raising interest rates or not,” said Russ Mould, investment director at AJ Bell.
Economists expect headline US inflation to have risen to 3.6% in August, compared with 3.2% in July.
The annualised rate of core inflation, which strips out volatile food and energy costs, is forecast to have fallen to 4.3% from 4.7% the previous month.
Henk Potts, market strategist at Barclays Private Bank said that after moderating at a rapid pace in recent months, August’s US consumer price index data may show a nudge up in price pressures, due to rising energy prices (US retail gasoline prices rose by 6.7% last month).
“Within the core measure, which excludes volatile inflation components like food and energy, we expect that while a decline in used-car prices to push core goods into deeper deflation, firmer airfares and hotel prices could help to drive services inflation higher,” he added.
Mould said if the CPI rises as expected it “greatly diminishes the chances of the Fed taking its foot off the pedal with rates.”
“The idea that the Fed will soon give clear guidance with regards to when the peak of rate hikes will occur is looking less likely by the day,” he thinks.
Elsewhere, chief executives of tech groups including OpenAI, Microsoft, Alphabet, and Tesla will meet lawmakers on Capitol Hill to discuss artificial intelligence in a closed-door meeting.
Apple will be in the spotlight after the launch of the iPhone 15 and other products.
Dan Ives at Wedbush said the launch “was overall an impressive event which in our opinion lays the groundwork for a major upgrade cycle over the next year that will surprise the Street to the upside.”
He has raised his price target to $240 from $230 and reiterates an ‘outperform’ rating given confidence in the success of this iPhone 15 upgrade cycle.
Moderna will be another stock to watch as the biotech company hosts its investor day, two days after the US federal drug regulator approved its updated Covid-19 booster.