4:12pm: Stocks fall, yields rise
The Dow closed Thursday down 174 points, 0.5%, at 33,631, the Nasdaq Composite lost 85 points, 0.6%, to 13,574 and the S&P 500 shed 27 points, 0.6%, to 4,350. The small-cap Russell 2000 index declined 38 points, 2.1%, to 1,735.
Investors digested hotter-than-expected inflation numbers. The yearly inflation rate was unmoved at 3.7% in September, according to the Bureau of Labor Statistics, compared to expectations that it would cool to 3.6%.
“Every [CPI] print that comes in where it shows more stickiness chips away at the inherent belief we will eventually get to 2% inflation. We’re not going to 2% inflation, but the bond market still wants to believe we will or come close to it,” said Phillip Colmar, managing partner and global strategist at MRB Partners.
Accordingly, the benchmark 10-year Treasury yield increased nearly 11 basis points to 4.707%.
12:00pm: Stocks mixed as inflation report digested
US stocks were mixed after a slightly stronger-than-expected inflation report reignited the debate as to whether the Federal Reserve needed to raise interest rates.
At midday, the Dow Jones Industrial Average was down 50.43 points, 0.2%, at 33,754.44, the S&P 500 was up 4.30 points, 0.1%, at 4,381.25 and the Nasdaq Composite was up 40.01 points, 0.3%, at 13,699.69.
Bank of America said it was a "reminder that there is still more work to do to get inflation under control."
"In short, the report reminded us that the path to 2% inflation is unlikely to be smooth sailing and the Fed must continue to err on the side of doing too much rather than too little," it added.
BofA expects one more rate rise. "That said, recent commentary from Fed speakers has leaned in the direction of a pause," it added.
The data saw a sharp rise in the dollar with the pound losing 0.7% to $1.2222.
"Today’s US economic data didn’t disappoint the dollar bulls, as the greenback rallied across the board. However, they may still get disappointed by the dollar once the dust settles," Fawad Razaqzada at City Index said.
He doesn't think the CPI data is going to be a "game changer."
9:43am: Stocks search for direction after inflation figures
US stocks struggled for direction in early exchanges after slightly stronger-than-expected headline inflation figures, although corre numbers were in line.
Shortly after the opening bell, the Dow Jones Industrial Average was up 3 points at 33,807.86, the S&P was little changed at 4,377.77 and the Nasdaq Composite was up 10.10 points, 0.1%, at 13,669.78.
Andrew Hunter at Capital Economics said the 0.3% m/m rise in core consumer prices in September suggests, at face value, that the downward trend in core inflation may be easing, but that’s largely because of a stronger gain in shelter prices which we know are likely to slow sharply again soon.
Headline CPI rose by a slightly stronger 0.4% m/m partly thanks to the further 2.1% rise in gasoline prices, but the more recent plunge in wholesale prices suggests that move will be more than reversed in October, he added.
"Overall, there is nothing here that will convince Fed officials to hike rates at the next FOMC meeting, and we continue to expect a more rapid decline in inflation and weaker economic growth to result in rates being cut much more aggressively next year than markets are pricing in."
Stocks on the move include Walgreens Boots Alliance jumped 5.2% after it unveiled $1 billion cost-cutting programme alongside narrowed fourth quarter losses, while Delta Air Lines (NYSE:DAL) climbed 1.1% after its quarterly earnings beat analysts’ estimates.
However, the carrier did cut the high end of its outlook for 2023 profit on rising fuel prices and larger-than-expected aircraft maintenance costs.
Target Corp jumped 2.7% as Bank of America upgraded to buy from neutral with a $135 price target, up from $120.
But Ford Motor Co fell 2.6% as it became the latest strike target for the United Auto Workers after members walked out of its largest plant, a pickup factory in Kentucky.
8:50am: Futures pare gains after inflation print
Stocks futures have eased after the US annual inflation rate was slightly hotter-than-expected in September, though core price pressure eased.
The yearly inflation rate was unmoved at 3.7% in September, according to the Bureau of Labor Statistics, against expectations it would cool to 3.6%.
Consumer prices rose 0.4% in September from August, ahead of a market forecast of 0.3%.
Excluding food and energy, the yearly core inflation rate eased to 4.1% in September, from 4.3% in July, as expected.
Core consumer prices grew 0.3% in September from August, also as expected.
US CPI 3.7% YoY EXPECTED 3.6% pic.twitter.com/3TmxiAUvtR
— GURGAVIN (@gurgavin) October 12, 2023
The figures ass to the dlimena faced by the Federal Reserve as it tries to balance bringing inflation down its 2% without choking off economic growth.
Separate data showed initial jobless claims were lower than expected in the week ended October 7.
New claims for unemployment support totalled 209,000, unmoved from the prior week's figure, which was upwardly revised from 207,000.
7:00am: Nasdaq called higher ahead of CPI
US markets are expected to open higher although the direction will likely be heavily influenced by consumer prices index figures before the market opens.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.4% higher, while those for the S&P 500 rose 0.4%, and contracts for the Nasdaq 100 futures were up 0.4%.
Economists expect CPI to have risen 0.3% in September, taking the annualised rate down to 3.6% from 3.7% in August. Core CPI, which strips out volatile food and energy costs, is also projected to have climbed 0.3% from August, bringing the yearly rate down to 4.1% from 4.3%.
The figures will provide the Federal Reserve with further evidence as it plots its next move on interest rates.
Minutes from the last FOMC meeting on Wednesday showed most officials expect one more increase in interest rates and all agreed rates would need to stay high for some time to come.
Andrew Hunter at Capital Economics said it would be difficult to argue that the minutes were "notably hawkish or dovish."
Although they confirmed that "a majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate", that was far from a unanimous view, he noted.
"Moreover, after repeatedly stressing the risks of doing too little to tackle inflation over the risks of doing too much, participants believed that risks to the achievement of the Committee’s goals had become more two sided."
Initial claims for US state unemployment, a proxy for lay-offs, are forecast to have ticked up to 210,000 last week from 207,000 the prior week.
In company news, US carrier Delta Air Lines (NYSE:DAL), pharmacy chain Walgreens Boots Alliance, and fast-food chain Domino’s pizza all report their latest quarterly earnings before the opening bell.
Stocks to watch include Illumina Inc (NASDAQ:ILMN) which has been ordered by EU regulators to unwind its $8 billion acquisition of cancer test developer Grail after it bought the USD8 billion company without the approval of Brussels.
Brussels has already fined Illumina, the world's largest gene-sequencing company, EUR432 million in July for defying what regulators described as a "cornerstone" of their authority.