People walk past the New York Stock Exchange on Wednesday, June 29, 2022 in New York. (AP Photo/Julia Nikhinson)
NEW YORK (AP) – Stocks churned to a mixed close on Wall Street after a highly anticipated report showed inflation accelerated across the country last month, but not by much more than expected. The S&P 500 managed a gain of 0.1% Wednesday after drifting between small gains and losses. The Dow fell 70 points, and the Nasdaq composite rose 0.3%. While the inflation data was a touch hotter than estimated, economists and investors don’t expect it to change the Federal Reserve’s anticipated track much. The forecast is still for the Fed to keep interest rates steady at its meeting next week. Treasury yields fell.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) – Stocks are churning in place on Wall Street Wednesday after a highly anticipated report showed inflation accelerated across the country last month, but not by much more than expected.
The S&P 500 was little changed in late afternoon trading after drifting between small gains and losses earlier. The Dow Jones Industrial Average was 113 points lower, or 0.3%, at 34,531, as of 3:18 p.m. Eastern time, and the Nasdaq composite was up 0.1%.
The moves follow a shaky immediate reaction across financial markets to the inflation report, where bond yields and stock prices swung back and forth several times. The report said U.S. consumers paid prices last month that were 3.7% higher than a year earlier, up from July’s inflation rate of 3.2%.
That’s discouraging for shoppers paying higher prices, but much of the acceleration was because of higher fuel costs, which can swing very sharply and quickly. Ignoring those, underlying inflation trends still look to be pointing toward continued moderation, economists said. Inflation peaked last year above 9%.
The inflation report was so highly anticipated because it will help steer what the Federal Reserve does next on interest rates. The Fed has already hiked its main rate to the highest level in more than two decades, which hurts prices for stocks and other investments, and the hope on Wall Street is that inflation has cooled enough for it to be done.
Wednesday’s data likely keeps the Fed on track to keep rates steady at its meeting next week, said Gargi Chaudhuri, head of iShares Investment Strategy, Americas. It could also mean trends continue in such a way that the Fed does not hike rates any more during this cycle.
But she also said expectations among traders on Wall Street for cuts to interest rates next year may be too aggressive. Such cuts can act like steroids for stocks and other investments, but inflation is still above the Fed’s target of 2%.
“If anything, higher headline inflation is proof that the Fed will need to keep rates higher for longer and that heavy rate cuts next year are mispriced,” Chaudhuri said.
Even though economists are willing to ignore fuel costs when looking at inflation to find the underlying trends, households and companies don’t get the same luxury.
Stocks of airlines were struggling after a couple warned of the hit to profits they’re taking because of higher costs.
American Airlines cut its forecast for profits during the summer because fuel costs are running higher than it expected. It also had to pay about $230 million in retroactive pay to pilots after they ratified a new labor contract. Its stock fell 6%.
Spirit Airlines said it’s also paying higher fuel costs this summer than expected, roughly $3.06 per gallon instead of the $2.80 it had earlier forecast. It’s also been seeing steep discounting to fares during the last few weeks. That pushed it to cut its forecast for revenue during the third quarter, and its stock fell 5.2%.
Other airlines also sank, including declines of 4.3% for United Airlines, 3.1% for Delta Air Lines and 2.3% for Southwest Airlines.
On the winning end of Wall Street were high-growth stocks that could be big beneficiaries if the Fed is indeed done hiking interest rates. High rates hurt all kinds of investments, but they often most hurt technology companies and others promising big growth far out in the future.
Amazon climbed 2% and was one of the strongest forces pushing upward on the S&P 500. Microsoft gained 1.1%, and Tesla climbed 1.3%.
Moderna jumped 3% after it reported encouraging results from a trial of a flu vaccine.
In the bond market, the yield on the 10-year Treasury fell to 4.25% from 4.27% late Tuesday. It had swung as high as 4.34% immediately after the inflation report.
The two-year Treasury yield, which moves more on expectations for Fed action, slipped to 4.99% from 5.02% late Tuesday. It also briefly leaped and was as high as 5.07% a minute after the inflation report’s release.
In markets abroad, stock indexes fell modestly across Asia and were mixed in Europe.
– –
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
