U.S. stocks drifted lower Thursday morning as rising Treasury yields and a slightly hotter-than-expected inflation report put pressure on the market following a four-day winning streak.
How are stocks trading
-
The S&P 500
SPX
was down 5 points, or 0.1%, to 4,371. -
The Dow Jones Industrial Average
DJIA
was down 19 points, or 0.1%, at 33,790. -
The Nasdaq Composite
COMP
shed 21 points, or 0.2%, to 13,638.
All three major indexes rose for a fourth straight session on Wednesday, the longest winning stretch for the Dow since late August, as stocks recovered from a September selloff that had been driven by a sharp rise in long-dated Treasury yields.
What’s driving markets
The September CPI Index showed consumer prices rose by 0.4% last month, just above economists’ expectations for a 0.3% increase. Meanwhile, core CPI, which strips out volatile food and energy prices, came in at 0.3%, which was exactly in line with expectations.
On a year-over-year basis, headline consumer prices rose 3.7%, unchanged from August but higher than the 3.6% increase economists had expected.
See: CPI report shows headline inflation for September was hotter than forecast on rising shelter costs
Federal Reserve Chairman Jerome Powell has said that the central bank is paying particularly close attention to core prices. Still, hotter-than-expected headline data caused stocks to deflate as market-based expectations for another Fed rate hike later this year ticked higher, according to CME’s FedWatch tool.
Check out: MarketWatch CPI live blog
Analysts said the data didn’t offer much guidance about the Fed’s next move, even as the market-based probability of a hike in December crept higher. CME data showed expectations for a hike rose to nearly 35% after the data were released, up from 26% a day earlier.
“A mixed report leaves the Fed hanging. CPI rose a tad more than expected, core CPI did the opposite. We could get one more hike, or none at all,” said Giuseppe Sette, president of Toggle AI, in emailed commentary.
Seema Shah, chief global strategist at Principal Asset Management, described the report as “reassuringly uneventful.”
“With core CPI in line with expectations and extending the disinflation narrative, there is nothing in the inflation report that should sway the Fed in one direction or the other,” she said in emailed commentary.
Treasury yields rose after the data, helping to constrain gains in stocks. The 10-year Treasury yield
BX:TMUBMUSD10Y
was up 3.5 basis points on the day at 4.607% after touching its lowest level in two weeks earlier. Yields on the 2-year Treasury note
BX:TMUBMUSD02Y
bore the brunt of selling, rising 5 basis points to 5.050%.
A similar dynamic played out on Wednesday with the release of the U.S. producer-price index. It showed producer prices rose 0.5% in September, down slightly from an 0.7% increase in August, but higher than what had been expected.
Minutes of the Fed’s September policy meeting, published Wednesday, showed members were “highly uncertain” about the future path of the economy and decided to proceed in a careful meeting-by-meeting approach to interest-rate policy.
The minutes, along with commentary from senior Fed officials suggesting that the rise in Treasury yields could allow the central bank to skip another rate hike, had helped contribute to rally in both bonds and stocks. Bond prices move inversely to yields, falling as yields rise.
U.S. stocks have risen sharply since Friday, when the Labor Department’s monthly jobs report showed a robust rise in job creation while wage growth continued to moderate. Some economists said the data appeared to support a soft landing.
These shifts had helped push the S&P 500 equity benchmark to a gain of 2.8% over the last four sessions.
Looking ahead, traders are now bracing for the start of third-quarter corporate earnings reporting season.
Aggregate S&P 500 earnings are forecast to have risen 1.3% from a year ago, according to Tajinder Dhillon, senior research analyst at Refinitiv, who also notes that the market has grown more optimistic about corporate profits of late.
Investors also digested a report on weekly jobless claims early Thursday. The data showed the number of Americans applying for unemployment benefits was flat at 209,000 last week.
Boston Fed President Susan Collins is due to speak about the economic outlook at 4 p.m. Eastern, the latest in a parade of senior Fed officials to share their latest views.
Companies in focus
-
Walgreens Boots Alliance Inc.
WBA,
+4.62%
were slightly higher after the drugstore chain and healthcare services company missed fiscal fourth-quarter profit expectations and provided a downbeat outlook. Shares had reversed losses from the premarket session. -
Delta Air Lines Inc.
DAL,
-2.17%
rose Thursday, after the air carrier reported third-quarter profit that beat expectations, and said the “robust demand” for travel it has been seeing has continued into the current quarter. -
Victoria’s Secret & Co.
VSCO,
-2.24%
rose more than 2% after the maker of bras, lingerie and sleepwear said it could lose less than previously thought during the third quarter. -
Ford
F,
-2.12%
fell 2.5% after the United Auto Workers union said 8,700 workers had walked out of a truck making factory in Louisville, Kentucky.
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