Newslooks/ New York/ On Wednesday, most U.S. stocks fell as traders adjusted expectations for the Federal Reserve’s upcoming interest rate cuts. Inflation data showed a slowdown to 2.5%, reinforcing the likelihood of a modest rate cut next week. The S&P 500 and Dow Jones Industrial Average both declined, while bond yields rose. Corporate earnings, particularly from Vera Bradley, and the performance of Trump Media & Technology Group also contributed to market movements.
Key Points:
- U.S. stocks fell as traders dialed back rate cut expectations.
- S&P 500 dropped 0.4%, Dow Jones Industrial Average lost 381 points.
- Inflation slowed to 2.5% in August, reinforcing a smaller Fed rate cut next week.
- Bond yields rose, with the 10-year Treasury yield at 3.65%.
- Vera Bradley’s stock dropped 6.5% on weaker earnings, while Trump Media fell 17.3%.
- Bitcoin and other cryptocurrencies fell by about 2%.
- Japan’s Nikkei 225 dropped 1.5% after rate hike signals from the Bank of Japan.
Most of Wall Street Falls as Rate Cut Expectations Moderate
U.S. stocks largely declined Wednesday as traders scaled back their expectations for the size of the Federal Reserve’s anticipated interest rate cuts next week. The S&P 500 dipped 0.4% in early trading, with nearly 90% of its components seeing losses. The Dow Jones Industrial Average was down 381 points, or 0.9%, while the Nasdaq composite posted a slight 0.1% gain.
This sell-off came as bond yields rose following the release of inflation data. The report showed that overall inflation slowed to 2.5% in August from 2.9% in July, meeting expectations. However, core inflation, which excludes volatile energy prices, increased slightly more than predicted from July to August. This core figure is closely watched by economists as a potential indicator of future inflation trends.
The data reinforced the belief that the Fed will cut its key interest rate next week, the first such reduction in over four years. Still, the report raised expectations that the Fed will opt for a smaller quarter-point cut rather than the half-point some had anticipated.
The Fed has signaled its shift toward lowering rates as inflation retreats from its 2022 highs. This move aims to prevent the economy from sliding into a recession and support the job market. However, many analysts worry that the rate cuts might come too late, as U.S. consumers are still grappling with elevated prices and limited purchasing power.
In corporate news, Vera Bradley saw its shares drop 6.5% after the handbag designer reported weaker-than-expected earnings and revenue, citing ongoing consumer spending challenges.
Trump Media & Technology Group, which owns the Truth Social platform, fell 17.3% after Donald Trump’s debate with Vice President Kamala Harris. The company’s stock has struggled since March, falling from over $66 to $15.41, impacting Trump, the company’s largest shareholder.
Cryptocurrencies also saw declines, with Bitcoin losing 2%, following recent endorsements by Trump.
Bond yields increased, with the 10-year Treasury yield rising to 3.65%, while the two-year yield jumped to 3.64%, reflecting expectations of the Fed’s upcoming moves.
Overseas, markets saw modest gains in Europe, while Japan’s Nikkei 225 fell 1.5% after comments from a Bank of Japan official suggested that the country could be preparing for an interest rate hike. The yen’s subsequent strengthening against the dollar added to market volatility.
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