Stocks slip on Wall Street amid fears about inflation, rates

By Joe Mcdonald, The Associated Press on February 15, 2023.

NEW YORK (AP) – Stocks are slipping on Wall Street after a report showed U.S. shoppers opened their wallets at retail stores last month by much more than expected. The S&P 500 was 0.5% lower in early trading Wednesday. The Dow and the Nasdaq also fell. The surprisingly strong report offers hope that the most important part of the U.S. economy, consumer spending, can stay afloat despite worries about a possible recession looming. But the strength also potentially adds more fuel to inflation. Turkey’s stock market jumped 10% after reopening for the first time since a Feb. 6 earthquake hit the region.

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

NEW YORK (AP) – Wall Street is trending modestly lower before the bell Wednesday ahead of a new batch of retail sales data, and one day after a mixed report on inflation.

Futures for the Dow Jones industrials edged 0.2% lower, while the S&P 500 dipped 0.3%.

The government reported Tuesday that inflation slowed to 6.4% in January from the previous month’s 6.5%. That was hotter than the consensus expectation of 6.2%, meaning the chances that the Fed will ease off after repeatedly raising the benchmark interest rate to cool the economy are slim.

Core inflation, which strips out more volatile food and energy prices to give a clearer view of the trend, rose to 0.4% over a month earlier from December’s 0.3%.

“Disinflation trends are in danger, which could prompt the Fed to both deliver more rate hikes and for them to stay higher for longer,” said Edward Moya of Oanda in a report.

At midday in Europe, London’s FTSE 100 in London inched up 0.1%, while the DAX in Frankfurt gained 0.6%. The CAC 40 in Paris rose 1.4%.

In Asia, the Shanghai Composite Index lost 0.4% to 3,280.49 and the Nikkei 225 in Tokyo gave up 0.4% to 27,501.86. The Hang Seng in Hong Kong tumbled 1.4% to 20,812.17.

The Kospi in Seoul retreated 1.5% to 2,427.90 and Sydney’s S&P-ASX 200 sank 1.1% to 7,352.20.

India’s Sensex gained less than 0.1% at 61,055.90. New Zealand advanced while Southeast Asian markets declined.

Stock prices have swung over the past year as traders try to figure out how far the Fed and other central banks will go to extinguish surging inflation. Some worry they might be willing to tip the global economy into a recession.

Traders expect two more U.S. rate hikes of 0.25 percentage points to slow business activity and hiring. Some expect cuts to start as soon the end of this year despite comments by Chair Jerome Powell and other Fed officials that rates might have to stay elevated for an extended period to get inflation to their 2% target.

If inflation stays above 5.5%, that “puts us on track for another four to six Fed rate hikes,” Clifford Bennett of ACY Securities said in a report. “Further retrenchment of the consumer and business investment is a certainty,” Bennett said.

The Fed’s benchmark lending rate stands at 4.5% to 4.75%, up from close to zero a year ago.

The market’s expectations for the Fed have been driving yields higher in the bond market.

The two-year Treasury has shot to its highest level since November, egged on last week by a stronger-than-expected report on the U.S. jobs market.

The two-year yield rose to 4.64% from 4.52%. The 10-year yield, which helps set rates for mortgages and other loans, rose to 3.76% from 3.70%.

In energy markets, benchmark U.S. crude lost 35 cents to $78.71 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.08 on Tuesday to $79.06. Brent crude, the price basis for international oil trading, shed 32 cents to $85.26 per barrel in London. It lost $1.03 the previous session to $85.58.

The dollar gained to 133.61 yen from Tuesday’s 133.06 yen. The euro declined to $1.0709 from $1.0739.

On Tuesday, the S&P 500 lost less than 0.1% and the Dow fell 0.5%. The Nasdaq composite gained 0.6%.

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