Stock market: Wall Street sharply lower, disappointed by an inflation indicator

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MARKET OVERVIEW. The Toronto Stock Exchange slipped more than 250 points late Tuesday morning, with losses in the technology and financial sectors paving the way for a broader decline, while major US indices also fell after the release of disappointing inflation data.

Consult market news (again).

Stock market indices at noon

In Toronto, the S&P/TSX fell 265.81 points (-1.33%) to 19,721.42 points.

In New York, the S&P500 fell 130.66 points (-3.18%) to 3,979.75 points.

the Nasdaq fell 497.60 points (-4.06%) to 11,768.81 points.

the DOW fell 902.78 points (-2.79%) to 31,478.56 points.

the loons fell $0.0082 (-1.0630%) to hit $0.7620.

the oil fell $1.26 (-1.44%) to $86.52.

L’gold fell $27.70 (-1.59%) to $1,712.90.

the Bitcoin declined from $1,168.90 (-5.30%) to $20,891.08.

the context

The CPI price index edged up 0.1% in August from July, while economists had forecast a 0.1% decline.

Year-on-year inflation in the United States hit 8.3%, down from 8.5% in July but better than the 8.0% the market had forecast.

“It’s a bit disappointing,” commented B. Riley Wealth Management’s Art Hogan, who also noted the downside surprise of the index ex-energy and food. The latter rose again by 0.6% in a month versus 0.3% expected and 0.3% in July.

Another black spot was food prices, which gained another 0.8% in a month and are up 11.4% for the year.

“It is clear that inflation is stubborn, which will encourage the Fed to remain zealous,” Art Hogan concluded.

“Inflation figures remain unacceptable to monetary policymakers,” added Rubeela Farooqi, chief economist at High Frequency Economics, in a statement. “These data mark another 0.75 basis point rate hike next week” by the Fed.

Traders immediately recalibrated their Fed rate forecasts and now see the Federal Reserve raising interest rates by at least 1.75 percentage points cumulatively in its last three meetings of the year, up from 1.50 points so far.

They even now give the scenario of a one-notch hike at the next Fed policy committee meeting on September 21-22 a non-negligible probability (18%), a hypothesis that until now no one had considered.

“It is becoming increasingly clear to traders that the tightening already undertaken by the Fed is not enough to cool the economy and lower inflation,” replied Allianz Investment Management’s Charlie Ripley.

The prospect of an even longer than expected fight against inflation also moved the bond market. The US 10-year Treasury yield rose to 3.43% from 3.35% the previous day.

The US 2-year interest rate, which is more sensitive to medium-term monetary policy expectations, rose to 3.74% from 3.57% the previous day, a high in almost 15 years (November 2007).

This hit to interest rates has pressured tech stocks, which depend on credit conditions to fund their growth.

The addition was heavy for Meta (META, -6.32%), Amazon (AMZN, -4.92%), NVIDIA (NVDA, -5.40%) or AMD (AMD, -5.59%), but all Nasdaq heavyweights fell together.

All members of the Dow Jones were also down.

“We had a nice rebound prior to this release and there was enough to fall back,” explained Art Hogan.

While recent sessions’ rallies have largely been fueled by hopes of a sharp deceleration in prices and possible Fed easing from late 2023, “traders will be surprised to see how difficult it is to get inflation under control. said Chris Zaccarelli of the Independent Advisor Alliance.

One of the few to make it, the Liquefied Natural Gas (LNG) specialist Cheniere (+4.03% to $167.21), the top US LNG exporter, which is taking full advantage of the upturn in the gas market and has raised its full-year guidance.

Another light in the dark, the software company oracle (ORCL, +0.66% to $77.59), which performed better-than-expected on its quarterly sales, helped by its remote computing (cloud computing) business.

Twitter retreated again (TWTR, -1.21% to $40.91), on the eve of an important day for the social network, marked by the hearing of whistleblower Peiter Zatko in Congress and the Extraordinary General Meeting that the Takeover by Elon Musk has now officially waived.

The specialist for exercise bikes and connected treadmills train declined (PTON, -9.52% to $10.00) after announcing the departure of its co-founder, John Foley, who is stepping down as executive chairman. He had already given up his post as general manager in February.

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