Stocks open lower after inflation is hotter than expected

By Yuri Kageyama And Matt Ott, The Associated Press on February 14, 2023.

NEW YORK (AP) – Stocks are opening lower on Wall Street and Treasury yields are rising after a highly anticipated report on consumer inflation came in hotter than expected, though it still marked another slowdown. The S&P 500 fell 0.6% in the early going Tuesday, and the tech-heavy Nasdaq composite lost 0.8%. The Dow gave back 0.6%. Inflation and the Federal Reserve’s response to it have been at the center of Wall Street’s struggles for more than a year. Inflation has been cooling since a summertime peak, and investors are trying to guess how quickly it could reach the Fed’s 2% target.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Markets are flat early Tuesday ahead of A closely-watched gauge on inflation in the U.S.

Futures for the Dow rose 0.1% and the S&P 500 gained 0.3%.

Economists expect that Tuesday’s report on consumer prices will show U.S. inflation slowed to 6.2% in January. That would be down from 6.5% the month before and a significant drop from this summer’s peak of more than 9%.

Perhaps more important than the overall number is what the data show specifically about prices for services outside of housing, for everything from haircuts to plane tickets. Costs for such services has remained stubbornly high even as it has begun to fall elsewhere.

Inflation is heading in the right direction. The question is how quickly and steadily it will come down to the Fed’s target of 2%. The central bank has said consistently that it plans to maintain higher rates for longer to ensure inflation is stamped out.

The debate on how hawkish the Fed should be is playing out against the backdrop of a decidedly lackluster earnings reporting season. Companies in the S&P 500 are on track to report a nearly 5% drop in earnings for the final three months of 2022 compared with a year earlier, according to the data firm FactSet.

In Europe at midday, France’s CAC 40 added nearly 0.5%, while Germany’s DAX and Britain’s FTSE 100 each gained 0.4%.

In a mixed sign of Japan’s shaky recovery, government data showed the world’s third largest economy grew at an annual pace of 0.6% in October-December, as restrictions related to the coronavirus pandemic eased, both abroad and in Japan. Tourism recovered, as did local travel, and exports grew, the Cabinet Office reported.

Japan’s benchmark Nikkei 225 gained 0.6% to finish at 27,602.77. Australia’s S&P/ASX 200 edged up 0.2% to 7,430.90. South Korea’s Kospi added 0.5% to 2,465.64. Hong Kong’s Hang Seng lost 0.1% to 21,134.55, while the Shanghai Composite rose 0.3% to 3,293.28.

Toyota Motor Corp. stocks rose 0.3% after its president-to-be announced a company strategy to strengthen the Japanese automaker’s offerings in electric vehicles in coming years, focusing on its Lexus luxury brand.

Ford shares were little changed after the U.S. automaker said it will cut 3,800 jobs in Europe over the next three years in an effort to streamline its operations as it contends with economic challenges and increasing competition on electric cars.

Yields were mixed Monday ahead of the inflation report. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, dipped to 3.70% from 3.75% late Friday. The two-year yield, which tends to move more on expectations for the Fed, was at 4.49%.

In energy trading, benchmark U.S. crude fell $1.25 to $78.89 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, fell $1 to $85.61 a barrel.

In currency trading, the U.S. dollar inched down to 132.16 Japanese yen from 132.42 yen. The euro cost $1.0758, up from $1.0726.

On Monday, the S&P 500 climbed 1.1% in anticipation of Tuesday’s report on inflation at the consumer level across the country. The Dow Jones Industrial Average also gained 1.1% and the Nasdaq composite rose 1.5%.

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Kageyama reported from Tokyo; Ott reported from Silver Spring, Md.

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