NEW YORK (AP) — Stocks fell Wednesday as Wall Street prepared for a long-awaited report on inflation soon to be released.
The S&P 500 fell 31.67 (0.7%) to 4467.71, its sixth drop in seven days. The Dow Jones Industrial Average fell $191.13, or 0.5 percent, to $35,123.36, while the Nasdaq Composite Index fell $162.31, or 1.2 percent, to $13,722.02 as big tech stocks led the decline.
The stock, which surged 19.5% through the first seven months of the year, cooled in August. There are several reasons behind this mini-rebound, including criticism that Wall Street was too quick to reach a consensus that inflation will continue to fall, the economy will continue to grow, and the Federal Reserve has already finished raising interest rates. There is a reason.
Thursday’s report will provide a big clue as to how justified those expectations are. The U.S. government plans to release a monthly update on consumer sentiment across the country, with economists expecting it to accelerate to 3.3% in July from 3% in June.
Such figures would be a significant drop from last summer’s peak of more than 9%, but economists say they are seeing a final improvement. Getting inflation down to the Fed’s 2% target may be the hardest part.
Fed officials have repeatedly said in recent days that future decisions on interest rates depend on what the data is, pointing specifically to reports on inflation and the job market.
“As risks become increasingly two-sided, Fed officials are beginning to shift their focus on how long to keep rates at sufficiently restrictive levels,” economists at Deutsche Bank said. Stated.
If Thursday’s data is significantly worse than expected, it could raise fears that the Fed’s job in fighting inflation is not done yet and that it will have to keep raising rates. At the very least, it could encourage the Fed to keep rates higher for longer than expected.
High interest rates put pressure on the economy as a whole and slow inflation by lowering investment prices. The Fed has already cut the federal funds rate to its highest level in more than 20 years. Rate hikes have historically taken a long time to have their full effect across the economy, and the risk of a recession remains.
Meanwhile, companies continue to report earnings this spring that beat analyst expectations.
Axon Enterprises, which makes Tasers and Axon body cameras, surged 14.1%, the biggest gain of any S&P 500 index. The company reported spring earnings far stronger than analysts expected.
Akamai Technologies also beat expectations in both profit and revenue, helping to lead the market. The company’s stock rose 8.5%.
Other than revenue Penn Entertainment rose 9.1%. The company announced it would pay $1.5 billion for the exclusive rights to rebrand its sports betting app to ESPN.
Lyft is the loser on Wall Street, down 10%. The ride-sharing company reported better-than-expected results in its latest quarter, and this quarter’s forecast also beat expectations. But analysts emphasized the company’s cautious comments on year-end expectations.
WeWork fell 38.6% to 13 cents after saying there were significant doubts about its ability to continue operating as cash dried up. The workspace-sharing company has already experienced some notable ups and downs in its history, reporting bigger-than-expected losses this spring.
Nvidia was the most heavily weighted S&P 500 index, down 4.7%. The company was one of the stocks to surge this year in Wall Street’s frenzy over artificial intelligence technology, raising fears it may have gone too far.
Other big tech stocks have also fallen, and the move is giving the S&P 500 even more punch due to their sheer size. Amazon fell 1.5%, Microsoft 1.2% and Tesla 3%. The threat of high interest rates tends to hit tech and other high-growth stocks hardest.
In the bond market, the 10-year Treasury yield fell to 4.00% from 4.03% late Tuesday. That yield helps set interest rates on mortgages and other loans.
The 2-year US Treasury yield, which was largely driven by Fed action expectations, rose from 4.76% to 4.80%.
In overseas stock markets, the index rose slightly in Europe and was mixed in Asia. Consumer-level prices in China in July were lower than in the same month last year, the report said.
China’s lifting of coronavirus restrictions was supposed to support the global economy, but its recovery has fallen short of expectations. But this weakness has also dampened some pressure on inflation in the rest of the world.
——
Contributed by AP Business writers Yuri Kageyama and Matt Ott.
