A slide in big tech and higher energy prices weighed on Wall Street sentiment ahead of inflation data that will help shape the outlook for the Federal Reserve’s next steps.
(Bloomberg) — A slide in big tech and higher energy prices weighed on Wall Street sentiment ahead of inflation data that will help shape the outlook for the Federal Reserve’s next steps.
The S&P 500 closed near session lows and the Nasdaq 100 dropped over 1%. Nvidia Corp., which has more than tripled this year amid the artificial-intelligence frenzy, slipped almost 5%. Tesla Inc., Apple Inc. and Amazon.com Inc. were all down. A 28% surge in European natural gas and an advance in oil to a nine-month high added to concern about further price pressures.
“Markets are vulnerable to a period of consolidation,” said Mark Hackett, chief of investment research at Nationwide. “This is not uncommon during the seasonally weak August and September period, though the fundamental strength in economic and earnings data supports higher markets once we emerge from the malaise.”
After the close of regular trading, Walt Disney Co. said it’s raising the prices of its streaming services, including a 27% increase for the advertising-free version of the flagship Disney+. The company reported earnings that exceeded expectations, even as the number of its streaming subscribers fell short. Illumina Inc. fell after the DNA-sequencing firm cut its profit outlook. Wynn Resorts Ltd.’s earnings per share beat the average analyst estimate.
CPI Report
July’s consumer price index will show a wave of disinflation, but with oil prices rising, the headline number is likely to increase sharply in August, according to Anna Wong at Bloomberg Economics. Still, unless inflation expectations climb substantially, policymakers will remain focused on the core numbers — which should keep moderating as growth slows, she added.
“Risk-on” expectations for Thursday’s CPI data have cooled relative to the last couple of reports, according to a survey conducted by 22V Research. Investors aren’t “risk-off,” but are more ambivalent following a string of good releases. The strong wage data from Friday’s employment data has likely gotten attention, the firm noted.
Even if inflation overshoots expectations, the Fed will likely feel its policy is restrictive enough as manufacturing struggles and the jobs market shows signs of softening, according to Fawad Razaqzada, a market analyst at City Index and Forex.com. That means a “small beat” wouldn’t matter too much, he noted.
“A goldilocks outlook in the US is what stock market investors on Wall Street have been enjoying this year – until the recent weakness,” Razaqzada added. “They will be looking for signs that the health and sentiment of the consumer remains positive, enough not increase the risks of a further Fed rate increase, and yet not too depressing to raise recession alarm bells. Somewhere in between could support stocks.”
Meantime, bond investors wanted the newest Treasury 10-year notes badly enough that they were willing to settle for a yield of less than 4%.
The $38 billion auction was awarded at 3.999%, becoming the third straight 10-year new issue to pay a fixed rate of less than 4%. Since the auction details were announced on Aug. 2, its bigger-than-anticipated size pushed the yield on the new 10-year in pre-sale trading up toward 4.19% on Friday. Ultimately, investors decided they could live on less.
Key events this week:
- India rate decision, Thursday
- US initial jobless claims, CPI, Thursday
- Atlanta Fed President Raphael Bostic pre-recorded remarks for employment webinar, Thursday
- UK industrial production, GDP, Friday
- US University of Michigan consumer sentiment, PPI, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.7% as of 4 p.m. New York time
- The Nasdaq 100 fell 1.1%
- The Dow Jones Industrial Average fell 0.5%
- The MSCI World index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0975
- The British pound fell 0.2% to $1.2722
- The Japanese yen fell 0.2% to 143.69 per dollar
Cryptocurrencies
- Bitcoin fell 2% to $29,392.4
- Ether fell 0.9% to $1,847.15
Bonds
- The yield on 10-year Treasuries declined two basis points to 4.00%
- Germany’s 10-year yield advanced three basis points to 2.50%
- Britain’s 10-year yield declined two basis points to 4.36%
Commodities
- West Texas Intermediate crude rose 1.7% to $84.30 a barrel
- Gold futures fell 0.6% to $1,949 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller, Richard Henderson and Cecile Gutscher.
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