Wall Street falls on hot inflation data

US stock indexes have fallen, with the Dow and the S&P 500 near two-year lows, after a bigger than expected rise in consumer prices last month sparked fears of another big rate hike from the Federal Reserve when it meets in November.

The headline consumer price index gained at an annual pace of 8.2 per cent in September, compared with an estimated 8.1 per cent rise.

The reading was lower than an 8.3 per cent increase in August.

Core CPI, which eliminates volatile food and fuel prices, gained 6.6 per cent last month, compared with the estimates of a 6.5 per cent increase.

The reading was much higher than a 6.3 per cent rise in August.

“Both the headline and core CPI came in much higher than expectations, and that’s disappointing,” said Mace M McCain, chief investment officer at Frost Investment Advisors.

“We would have hoped to see some moderation in inflation and we’re not seeing that at this point. There’s just nothing to dissuade the Fed from their path.”

The inflation report follows data on Wednesday that showed US producer prices increased more than expected in September, prompting traders of US interest-rate futures to price in a near 91 per cent odds of a fourth straight 75-basis-point (bps) hike by the Fed at its meeting next month, with some also pricing in a 9.0 per cent chance of a 100 bps rise.

Minutes from last month’s central bank meeting showed policy makers agreed they needed to maintain a more restrictive policy stance, and Fed Chair Jerome Powell vowed that they would “keep at it until we’re confident the job is done”.

The Fed is showing no signs of a let up in its fight against inflation, leading to immense market volatility in recent months and triggering a sell-off in rate-sensitive technology shares.

Megacap growth stocks such as Microsoft Corp, Apple Inc, Meta Platforms Inc, Alphabet Inc , Nvidia Corp, Tesla Inc, and Amazon.com slipped between 1.7 per cent and 4.7 per cent as the 10-year benchmark Treasury yield touched fresh 2008 highs at 4.0 per cent.

In early trading, the Dow Jones Industrial Average was down 183.99 points, or 0.63 per cent, at 29,026.86, the S&P 500 was down 38.67 points, or 1.08 per cent, at 3,538.36, and the Nasdaq Composite was down 186.08 points, or 1.79 per cent, at 10,231.02.

Markets briefly rose earlier in the day after a report that the United Kingdom government was discussing making changes to its fiscal plan that had spooked global financial markets when it was announced last month.

Third-quarter earnings reports will also help determine the impact of higher prices on company results, with analysts now expecting profit for S&P 500 companies to have risen just 4.1 per cent from a year ago, much lower than an 11.1 per cent increase expected at the start of July, according to Refinitiv IBES data.

Walgreens Boots Alliance Inc rose 3.24 per cent following better than estimated fourth-quarter results.

Delta Air Lines Inc gained 1.92 per cent after the carrier forecast a 9.0 per cent rise in fourth-quarter from the same period in 2019, helped by robust domestic and international demand.

Declining issues outnumbered advancers for a 4.89-to-1 ratio on the NYSE and for a 3.39-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week high and 170 new lows while the Nasdaq recorded 10 new highs and 514 new lows.

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