The stock market was falling Wednesday as investor sentiment wobbled ahead of the release of key inflation data.
Futures for the Dow Jones Industrial Average indicated an open 50 points lower, after the index slipped 112 points Tuesday to close at 36,319. Futures for the S&P 500 and Nasdaq signaled a similar lower start.
All eyes are on the release of consumer-price index data later in the day, which will feed into the debate among investors over whether inflationary spikes are merely transitory or more long-lasting. Consensus estimates are for inflation to rise 0.6% in October, marking the sixth straight month with year-over-year inflation above 5%.
“As investors look forward to today’s number, the long equity advance finally petered out,” said Jim Reid, a strategist at Deutsche Bank, pointing to the S&P 500 falling Tuesday to snap a run of eight successive gains—dashing hopes of the longest winning streak since 2004.
“A lot is resting on this inflation being transitory. This will be the multi-trillion dollar question for 2022, that’s for sure,” Reid added.
“The main driver is likely to be price pressures in those categories most sensitive to supply shocks, such as new and used vehicles,” the strategist said, referring to where inflationary pressures are likely to be most pronounced. He also noted that there was downside risk in Covid-19-sensitive sectors such as lodging and airfares, where prices fell in the late summer amid the spread of the Delta variant of coronavirus.
A slip in equities has come amid a rally in bonds, which is where skittish investors fled Tuesday. As bonds have surged, yields—which move inversely to prices—have fallen, apparently in the face of evidence that should suggest the contrary, such as the producer-price index (PPI) measure of inflation released Tuesday.
“Confirmation of U.S. pipeline inflation running at 7-9% yesterday (PPI report) was drowned by speculation on who the next chair of the Fed will be, or practically anything apart from facing up to the reality of prices pressure,” said Padhraic Garvey, the head of research for the Americas at ING bank. “We still think this down move in market rates looks off, and we expect a reversion higher,” he added.
The yield on the benchmark 10-year U.S. Treasury note was slightly higher Wednesday at 1.47%.
“Clearly bonds are being bought into, regardless of inflation,” Garvey said. “But that can’t continue.”
Here are three stocks on the move Wednesday
DoorDash (DASH) shot up 17% in the U.S. premarket, after the leading food delivery group reported strong quarterly earnings late Tuesday and said it would buy Helsinki-based Wolt Enterprises for $8.1 billion in stock.
Marks & Spencer (MKS.U.K.), a leading British grocer with a growing delivery business, soared 15.5% in London after reporting earnings and revenue ahead of expectations.
Adidas (ADS.Germany) sank 5.8% in Frankfurt, after the sportswear giant reported a quarterly earnings and sales miss amid supply-chain disruptions.
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