Wall Street falls as investors assess inflation data

  • US consumer spending, inflation slows in November
  • Indexes down: Dow 0.21%, S&P 0.23%, Nasdaq 0.65%

Dec 23 (Reuters) – Wall Street’s main indexes fell in thin pre-holiday trading on Friday after data showed inflation cooled further in November, but not enough to discourage the Federal Reserve from driving interest rates to higher levels next year.

The Commerce Department report showed that US consumer spending did not increase in November, while inflation was more subdued.

Personal consumption expenditures (PCE) inflation, the Fed’s preferred inflation gauge, rose 0.1% last month after rising 0.4% in October. In the 12 months in November, the PCE price index increased 5.5% after advancing 6.1% in October.

“The good news is that the PCE decreased to a number of 5.5. But again, it is still more than what the Fed expects and that is part of the reason that we see a pop in rates, which shows that the Fed is not done with their rate. -The growing cycle,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

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“Equity markets are wrong to think that the Fed will stop and finally cut interest rates later in 2023. And now I don’t see that happening anytime soon.”

On the other hand, the benchmark survey showed US consumers expect price pressures to moderate significantly next year, with annual inflation falling to the lowest in 18 months in December.

Wall Street indexes sold off sharply in the previous session after data showed a steady US economy, fueling worries that the central bank could keep rates moving for longer.

Market participants stuck to their expectations of a 25-basis Fed rate hike in February, but they see the terminal rate hitting 4.9% in May 2023 versus 4.8% before Friday’s data.

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Investors have been jittery since last week as the Fed remains stubbornly committed to achieving its 2% inflation target and is forecast to continue raising rates to over 5% in 2023, a level not seen since 2007.

The benchmark S&P 500 (.SPX), which is down nearly 20% this year, is on track for its biggest annual decline since the 2008 financial crisis. The tech-heavy Nasdaq has shed more than 33% this year and the Dow (.DJI) 9%.

At 10:12 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 69.67 points, or 0.21%, at 32,957.82, while the S&P 500 (.SPX) was down 8.94 points, or -0.23%, at 3,813.45, and Nasdaq, and Nasdaq. The Composite (.IXIC) was down 67.80 points, or 0.65%, at 10,408.32.

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A number of megacap-rated stocks such as Apple Inc ( AAPL.O ), Microsoft Corp ( MSFT.O ) and Meta Platforms Inc ( META.O ) fell more than 1% each.

All major S&P 500 sector indexes, except energy, were lower.

Dow Jones parent News Corp (NWSA.O) gained 2% on reports that billionaire businessman Michael Bloomberg was interested in acquiring Dow Jones or the Washington Post.

Decliners outnumbered advancers by a 1.26-to-1 ratio on the NYSE and a 1.55-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and one new low, while the Nasdaq recorded a new 20-week high and a new 110.

Reporting by Shubham Batra, Bansari Mayur Kamdar, Ankika Biswas and Johann M Cherian in Bengaluru; Edited by Shounak Dasgupta

Our standards: The Thomson Reuters Trust Principles.

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