4:05pm: US equities end lower on inflation fears
US stocks closed lower after October’s consumer price reading showing the biggest annual jump in more than 30 years, triggering a spike in bond yields.
The consumer price index jumped 6.2% from a year ago, well above the 5.9% estimate. The yield on the benchmark 10-year Treasury, which had trended lower in recent weeks, jumped by about 11 basis points.
On the day, the Dow Jones Industrial Average fell by 240 points, or 0.66%, to 36,079 and the S&P 500 dropped 0.82% to 4,646.
And the tech-heavy Nasdaq declined 1.66% to 15,622.
12.05 pm: Equities ease as consumer prices in October rose at the fastest pace since 1990
US stocks were lower in noon trading as the consumer price index for October increased by a greater-than-expected 6.2% from a year ago, the largest annual increase since 1990.
At midday, the Dow fell 40 points to 36,281, while the S&P 500 eased 7 points at 4,679 and the tech-heavy Nasdaq slipped 78 points to 15,809.
“Wednesday’s Consumer Price Index showed another month of inflation data well above the Federal Reserve’s inflation target, primarily due to continued supply chain issues and labor shortages,” Quadratic Capital Management founder Nancy Davis said.
“If inflation doesn’t subside, the Federal Reserve may need to taper at a more substantial rate and hike interest rates, which could hurt stocks and bonds,” Davis added.
Notable companies expected to report financial results after today’s close include Disney, Affirm, and Bumble.
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9.41am: US stocks start in the red
US shares started weaker in New York as traders digested the latest inflation data, which put interest rate hikes by the Federal Reserve back in the spotlight.
In early deals on Wall Street, the Dow Jones Industrial Average shed around 50 points to stand at 36,269. The S&P 500 lost around 21 points at 4,663. The tech-laden Nasdaq index lost over 176 points at 15,710.
The US consumer price index (CPI) jumped 0.9% in October, according to official data, against expectations from economists for a 0.6% increase. It was the largest annual increase since 1990.
"US inflation hit its highest level since 1990 with the headline rate jumping more than expected to 6.2% from 5.4%. The core rate, which strips out food and energy prices, also exceeded expectations, rising from 4.3% to a 30-year high of 4.6%,” said Rupert Thompson, Chief Investment Officer at wealth management firm Kingswood
“These numbers can only increase the Fed’s worries that the surge in inflation will prove rather less transitory than it had been hoping.”
8.55am: Inflation continues to rise
US stock futures remained weak after CPI inflation hit a three-decade high of 6.2% in October, above forecast, as supply shortages and strong consumer demand continued to push up prices.
Consumer spending increased at an annual rate of 1.6% in the third quarter, a sharp slowdown from a 12% increase in the prior quarter, however, much of that deceleration was due to the scarcity of new cars and other durable goods. Consumer spending on services last quarter climbed at an annual rate of 7.9%.
Consumers’ median inflation expectation for three years from now stayed at 4.2% in October, the same as in September, according to a survey by the New York Fed. That level is the highest since the survey began in 2013.
Federal Reserve officials are closely watching inflation measures to gauge whether the recent jump in prices will be temporary or lasting. One such factor is consumer expectations of future inflation, which can prove self-fulfilling as households are more likely to demand higher wages and accept higher prices in anticipation of higher future price growth.
In a quick reaction piece, Naeem Aslam, chief market analyst commented: "Inflation isn’t going down and traders are reacting to this by pushing the dollar index higher. As for the equity markets, higher inflation isn’t the best news that they need ahead of their holiday and this is why see futures moving lower.
"For gold, which is a perfect inflation hedge, we see massive upward moves. Basically, gold is on fire and so it bitcoin which is also inflation hedge. This is despite the fact that the dollar index is up as traders believe that the fed is behind the curve and they need to do something to control the pace of inflation."
6.30am: US stocks seen opening down
US stocks are expected to open lower as investors await a key inflation report and stocks take a breather from their recent strong run.
Futures for the Dow Jones Industrial Average declined 0.23% in Wednesday pre-market trading, while the broader S&P 500 index shed 0.29% and those for the tech-heavy Nasdaq 100 fell 0.44%.
US stocks closed lower on Tuesday, ending an eight-day winning streak, with a 12% slide in Tesla’s share price weighing on the Nasdaq after company founder Elon Musk hinted in a Twitter post that he might be willing to sell 10% of his shares in the electric vehicle maker.
At the close, the Dow was 0.31% lower at 36,320, while the S&P 500 shed 0.35% to 4,685 and the Nasdaq sank 0.6% to 15,887.
October consumer price index data is expected to show a 0.6% jump from the previous month and a year-on-year acceleration to 5.9%. The producer price index for the same month, released on Tuesday, also increased 0.6% month over month, in line with the consensus estimate but was still up 8.6% from October 2020.
“Wall Street closed lower, ending one of its best win streaks in years,” commented Neil Wilson, chief market analyst at markets.com
“The decline in Tesla was a factor, but ultimately such a straight charge up will just run out of gas sooner or later.
“The look-ahead to inflation is maybe a factor so this needs to be assessed with today’s CPI print.”