The Dow is nursing a triple-digit fall after US inflation figures suggested the climate is right for an interest rate rise.
July’s Consumer Price Index rose a seasonally adjusted 0.1%, and although the gain was only half as big as economists had expected, it was the sixth month in a row that the index had risen.
A higher interest rate is one of the tools used by central banks to keep inflation in check, so pundits suggested the reading made a rate rise before the end of the year more likely.
We’ll get more clues on the likelihood of that happening later on today, when the minutes from the July meeting of the Federal Open Market Committee are released.
The minutes should provide insight into whether Federal Reserve chairperson Janet Yellen’s view that a rate rise should come this year is shared by other policy makers, many of whom have been sitting on the fence.
“Although US inflation has moved up marginally since last month, the minutes from the Fed’s latest policy meeting later today are going to reveal much more in terms of a potential September interest rate hike,” suggested Denis de Jong, managing director of forex trading firm UFX.com.
“Everything looked on track for Fed Chair Janet Yellen to press the button but, just as she could see the light at the end of the tunnel, China shocked the world by deciding to depreciate its currency twice in quick succession.
“It seems as though growth in China isn’t as strong as we thought which is a very real concern for the health of the global economy.
“This, combined with continuing disinflationary forces around the world, could be enough to plant a big enough seed of doubt in the minds of Yellen and her Fed colleagues,” de Jong speculated.
The Dow Jones was down 124 at 17,387 after half an hour or so, while S&P 500 shed 15 points at 2,081; the Nasdaq Composite tumbled 38 points to 5,021.
Home improvements chain Lowe’s Cos (NYSE:LOW) defied the trend, rising 0.8%, after a mixed set of results. Earnings came in short of expectations, though sales growth surprised to the upside.
Elsewhere in the retail sector, office equipment and consumables supplier Staples (NASDAQ:SPLS) also came up shy of market forecasts with its second quarter earnings. The shares were off 0.8%.
Second quarter sales were down 5% on a year earlier, but were up an underlying 1% once the impact of store closures was removed.
Another retailer, Target (NYSE:TGT) was wanted after it raised its earnings outlook for the year on the back of better-than-expected second quarter profits.
The company now expects earnings per share (EPS) for the year to be in the range of US$4.60 to US$4.75, 10 cents higher at both ends than the previously indicated range.
US data storage giant Seagate Technology (NASDAQ:STX) is to buy Dot Hill Systems Corp, a supplier of hardware and software solutions, in a deal worth US$694 million.
The disk drive maker’s shares retreated 79 cents to US$51.30.