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Business

Stocks Waver After Producer Prices Rise More Than Expected

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Stocks wavered after producer-price data came in hotter than expected, disappointing investors who had hoped for signs of easing inflation before the Federal Reserve’s meeting next week.

The S&P 500 was flat on Friday morning, while the Dow Jones Industrial Average lost 0.1%. The technology-focused Nasdaq Composite rose 0.2%.

The producer-price index, which measures what suppliers are charging businesses and other customers, climbed 0.3% in November compared with the previous month, the Labor Department said Friday morning, the same as October’s revised 0.3% increase. Economists surveyed by The Wall Street Journal had expected U.S. supplier prices to increase 0.2% for November.

Investors had been hopeful that the inflation reading would offer evidence that price pressures in the U.S. are abating and would help solidify a smaller interest-rate increase next week. The Fed will make its next interest-rate decision on Wednesday, and the PPI data—combined with consumer-price data Tuesday—are expected to factor heavily into the trajectory of interest rates over the coming months.

Stock futures, which had traded higher throughout the morning, turned lower after the data’s release. Yields on U.S. government bonds rose, also reversing their performance earlier in the day.

In recent days, investors have grown increasingly worried that elevated inflation will force the Fed to keep lifting rates to higher levels than once expected, potentially pushing the U.S. economy into a recession.

“Even though the market sometimes seems to ignore Powell, thinking he’s bluffing, he keeps reiterating that he will put this economy into a recession if he has to,” said Eric Sterner, referring to Fed chairman

Jerome Powell.

Mr. Sterner, chief investment officer at Apollon Wealth Management, said he expects markets could retest their recent lows in the first and second quarter of next year.

“We’re stuck in this rut right now waiting for inflation to normalize and it may take all of next year for that to happen,” he said.

Those concerns about how high interest rates might go—and how they will affect the economy—have led to choppy trading in U.S. stocks recently and interrupted a rally that began in October. All three major U.S. indexes are on pace to end the week with losses, breaking a two-week winning streak. As of Thursday, the S&P 500 had fallen 2.7% for the week.

“The markets are so sensitive to this right now,” said Susannah Streeter, senior investment and markets analyst at

Hargreaves Lansdown.

“Although supersized rate hikes are probably in the rearview mirror, it’s about how long more gradual rate increases will continue for, and that’s why you’ve got these twin evils looming: recession and high inflation. That’s the real concern—that we’ll get a stagflation scenario.” 

The S&P 500 on Thursday snapped a five-day losing streak.



Photo:

BRENDAN MCDERMID/REUTERS

Yields on government bonds rose, with the yield on the benchmark 10-year U.S. Treasury note climbing to 3.525%, from 3.492% Thursday. The yield on the two-year note, which is more sensitive to near-term interest-rate expectations, rose to 4.332%. Yields rise when bond prices fall.

Brent crude, the international benchmark for oil prices, climbed 1.1% to $77 a barrel, on pace to possibly break a six-session losing streak that amounted to its longest since August 2021. Oil prices have slumped recently amid concerns that slowing economic growth will impede demand for fuel. Both Brent and its U.S. counterpart WTI—both of which reached eye-popping heights this year—are now trading lower on a year-to-date basis.

Outsize market moves have followed the release of inflation data in recent months.

“When CPI comes out slightly above or slightly below, you get massive market action,” said Brandon Pizzurro, director of public investments at GuideStone Capital Management. “Those of us that are defensively positioned are either going to really benefit from next Tuesday and Wednesday, or feel some short term pain if this Santa Claus rally is kickstarted.”

In China, major indexes climbed amid a sharp rise in property stocks. Hong Kong’s Hang Seng rose 2.3%. In mainland China, the Shanghai Composite added 0.3%, helping it notch its sixth consecutive week of gains. Japan’s Nikkei 225 gained 1.2%.

In Europe, the pan-continental Stoxx Europe 600 rose 0.4%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Jack Pitcher at jack.pitcher@wsj.com 

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Business

Dow Surges 900 Points in Volatile Trading

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U.S. stocks turned sharply higher Thursday, a head-spinning reversal after major indexes spent much of the morning deep in negative territory.

Stocks tumbled in early trading after new data showed that inflation remains persistently high, strengthening expectations for continued large interest-rate increases from the Federal Reserve. At their lows, the Nasdaq Composite had fallen more than 3%, the S&P 500 had dropped more than 2%, and the Dow Jones Industrial Average had declined nearly 2%, according to Dow Jones Market Data.

The morning’s declines followed what had been a dismal stretch for stocks. The S&P 500 on Wednesday fell for the sixth day in a row, hitting its lowest closing level since November 2020.

Traders appeared to decide that the selling had gone too far. Stocks pared their losses throughout the morning, then turned green shortly after 11 a.m. The S&P 500 recently was up 2.8% while the Dow industrials were up about 3%, or about 900 points. The Nasdaq Composite advanced 2.3%.

“What the market is experiencing is the influences of a lot of short-term traders,” said Tom Galvin, chief investment officer at wealth management firm City National Rochdale. While some traders dumped stocks after the inflation data, “once they were done selling, I think markets started to stabilize.”

The turn higher came as a relief after another punishing span in the markets.

The Nasdaq Composite, like the S&P 500, closed lower on Wednesday for a sixth consecutive trading day. On Tuesday those losses tipped the tech-heavy equities gauge into a bear market—Wall Street parlance for a decline of 20% or more from a recent peak—for the second time this year.

Still, such heart-stopping moves—sharp gains as well as steep drops—can be a sign of trouble. Markets were rocked by similar gyrations as they tumbled early in the pandemic.

Investors have been fixated on any signals about the path of inflation and the trajectory of the Federal Reserve’s campaign to tame the price increases by raising interest rates. Rising rates put pressure on the valuations that investors are willing to pay for stocks, while also raising concerns about companies’ future earnings.

Earlier Thursday, new data from the Labor Department showed that a reading of U.S. consumer inflation excluding volatile energy and food prices accelerated to a new four-decade high. The so-called core measure of the consumer-price index gained 6.6% in September from a year earlier, the biggest increase since August 1982.

The overall consumer-price index, meanwhile, increased 8.2% in September from the same month a year ago, down from 8.3% in August and 9.1% in June.

That move lower could be welcome news for investors looking to justify buying back into a stock market that is trading much more cheaply than in the recent past.

“The fact that you’re seeing some peaking out in inflation to where maybe we just don’t have to fight the Fed so much, people will feel comfortable buying in at these levels,” said Dan Genter, chief executive and chief investment officer at Genter Capital Management.

Investors have debated whether signs of stress creeping into some markets might cause the Fed to slow its pace of interest-rate increases. Volatility in U.K. government-bond markets, following government plans for large, debt-funded tax cuts, has sparked margin calls for pension funds and rippled into U.S. junk-debt markets. 

Mortgage rates hit a 20-year high on Thursday, a development that is likely to add to the pressure on the cooling housing market, potentially accelerating the shakeout of this cyclical industry.

Federal Reserve officials expressed concern at their meeting last month over the persistence of high inflation. They revised higher their expectations for rate increases, though some signaled caution about overdoing them amid risks of economic and financial volatility. The International Monetary Fund has warned that global central banks’ moves to quickly raise interest rates have fueled increased risks to the financial system.

A series of interest-rate rises have rippled through the U.S. economy, and more are projected to be on the way. WSJ breaks down the numbers hitting Americans’ wallets this year and beyond. Photo: Elise Amendola/Associated Press

“Market volatility and financial stability is something we’re following closely,” said

Carsten Brzeski,

ING Groep’s

global head of macro research, adding that the fast rise in interest rates “is clearly a potential risk.” 

Additional data from the Labor Department showed that 228,000 Americans applied for unemployment benefits in the week ended Oct. 8, up from 219,000 the week prior.

In bond markets, the yield on the benchmark 10-year U.S. Treasury note rose to 3.939% from 3.901% Wednesday, reversing earlier losses ahead of the inflation data. Yields and prices move inversely. 

In energy markets, Brent crude, the international benchmark for oil prices, rose 2.3% to $94.57 a barrel. 

Overseas, the pan-continental Stoxx Europe 600 rose 0.8%.

Traders worked on the floor of the New York Stock Exchange last week.



Photo:

BRENDAN MCDERMID/REUTERS

In Asia, major indexes closed with losses. Hong Kong’s Hang Seng fell 1.9% and South Korea’s Kospi declined 1.8%. Japan’s Nikkei 225 and China’s Shanghai Composite edged down 0.6% and 0.3%, respectively.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Karen Langley at karen.langley@wsj.com

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Business

Stocks Slip After Fed Minutes and Inflation Data

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U.S. stocks slipped Wednesday in the wake of new inflation data and the release of the minutes of the September meeting of the Federal Reserve’s rate-setting board.

The S&P 500 edged down 11.81 points, or 0.3%, to 3577.03, a nearly two-year low. The Dow Jones Industrial Average lost 28.34 points, or 0.1%, closing at 29210.85. The Nasdaq Composite dropped 9.09 points, or 0.1%, to 10417.10, a day after the tech-heavy index entered its second bear market of 2022, marking a drop of more than 20% from its recent high on Aug. 15.

Investors have been on edge this week ahead of the release of Thursday’s report on consumer prices in the U.S. that will shed light on how much work the Fed has left to do in containing decades-high price rises. In recent months, inflation gauges have shown widespread pricing pressures on categories such as food and housing, while energy prices have eased.

U.S. suppliers increased the prices they charge customers by 0.4% in September from a month earlier, according to data released Wednesday. Economists polled by The Wall Street Journal had expected a 0.2% increase.

As inflation climbs in the U.S., rising food and energy costs have pushed the nation’s most popular price index to its highest level in four decades. WSJ’s Gwynn Guilford explains how the consumer-price index works and what it can tell you about inflation. Illustration: Jacob Reynolds

“Inflation certainly broadened out and entered into areas that were more sticky,” said

Kiran Ganesh,

a multiasset strategist at

UBS.

“That’s why there’s been an increase in expectations…that the Fed needs to keep rates at a higher level for longer to get inflation down.”

The Fed released Wednesday afternoon the minutes of its September meeting, which showed officials concerned over the persistence of high inflation and expecting that bringing prices and wages down would likely require the labor market to weaken.

The Fed’s stance has heightened the risk of a recession, but it doesn’t appear the economy is in one now, said Merk Investments strategist Nicholas Reece. A recession may in fact come as late as the second half of next year, he said. That, however, likely means the market may churn along for several more months before finally hitting a cycle low. “That’s one of the things hanging over this market,” he said.

Corporate earnings over the next several weeks will also provide insight into how businesses are dealing with price pressures.

PepsiCo

on Wednesday again lifted its sales outlook for the year as it continues to push through price increases on its snacks and drinks, sending shares up $6.80, or 4.2%, to $169.39.

Traders working on the floor of the New York Stock Exchange last week.



Photo:

BRENDAN MCDERMID/REUTERS

The coming days will bring updates from a range of companies including

Delta Air Lines

and banks such as JPMorgan Chase and Citigroup.

Mr. Ganesh said earnings estimates for the remainder of the year and 2023 are too optimistic, posing another risk for stocks in the months ahead.

“If you look at market performance so far this year, it’s pretty much fully explained by the move in rates and bond yields,” said Mr. Ganesh. “Higher rates should mean lower expectations for growth and earnings, and that’s not priced into the market yet.”

Investors also continue to watch turmoil in U.K. government-bond markets, which have been highly volatile since the government set plans for large, debt-funded tax cuts last month. The Bank of England’s attempt to prevent broader market dysfunction that had hit pension funds particularly hard has had mixed results. 

On Tuesday, BOE Gov. Andrew Bailey confirmed the central bank plans to wind down its bond-market intervention program by Friday as planned, sparking a selloff in the British pound. The message was reiterated by BOE officials on Wednesday.

U.K. markets were mixed. The pound rebounded 1.2% to $1.1099, but U.K. government bonds, known as gilts, remained under pressure. The 30-year U.K. gilt yield briefly topped 5%, a level last seen before the central bank’s intervention. Yields rise as prices fall.

The U.S. 10-year Treasury note was down slightly at 3.901%.

“Bond markets think the BOE isn’t doing enough,” said

Viraj Patel,

a global macro strategist at Vanda Research. Despite the BOE’s pledge to wind down bond-buying, Mr. Patel still believes the central bank would step in with support if volatility again threatens financial stability.

“They won’t let this get to some sort of chaos that spirals out of control,” he said.

The U.K.’s FTSE 100 fell 0.9% to 6826.15, while the pan-European Stoxx Europe 600 lost 0.5% to 385.88.

Asian stocks were mixed. China’s benchmark Shanghai Composite gained 1.5% to 3025.51, while Hong Kong’s Hang Seng declined 0.8% to 16701.03 and Japan’s Nikkei 225 index was little changed at 26396.83.

Write to Chelsey Dulaney at chelsey.dulaney@wsj.com and Paul Vigna at Paul.Vigna@wsj.com

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Business

Dow Slips Again After Entering Bear Market

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The Dow industrials and the S&P 500 fell again Tuesday as investors parsed a spate of economic data and comments from Federal Reserve officials.

All three indexes spent much of the morning in the green, but it didn’t last. The Dow Jones Industrial Average, which entered a bear market on Monday, fell 125.82 points, or 0.4%, to 29134.99. That marked its sixth consecutive day in the red.

The broad S&P 500 slipped 7.75 points, or 0.2%, to 3647.29, closing at its lowest level of the year for the second day in a row. The S&P is also now down for six days in a row, its longest losing streak since February 2020, according to Dow Jones Market Data.

The technology-heavy Nasdaq Composite rose 26.58 points, or 0.2%, to 10829.50.

Tuesday’s declines prolong a brutal year for financial markets. Stocks and bonds have both dropped sharply this year, an unusual tandem that reflects just how unnerved many investors feel. The Dow, the S&P and the Nasdaq are all on pace for their worst first nine months of a year since 2002.

Stubbornly high inflation has roiled markets since the start of the year. The Federal Reserve in response has been raising interest rates to try to cool the economy, stoking fears that the central bank will tip the U.S. into recession. Some investors hoped this summer that the rate increases might be coming to an end, and stocks rebounded briefly. Now, investors are coming to grips with the idea that bigger interest-rate increases—and weaker global economic growth—are here to stay for quite a while.

Neel Kashkari,

president of the Federal Reserve Bank of Minneapolis, reaffirmed the central bank’s resolve to bring down persistent and elevated inflation in a Tuesday interview with The Wall Street Journal. “There’s a lot of tightening in the pipeline,” Mr. Kashkari said, adding that the Fed is “committed to restoring price stability” but also recognizes “there is a risk of overdoing it.” 

A sharp rise in interest rates has been weighing on stocks, said

Mimi Duff,

managing director at GenTrust, a registered investment adviser with about $3 billion in assets. “I think we need to start seeing the rates stabilize before we can bottom out in equities,” she added. 

As markets react to interest-rate hikes and the threat of a recession, stocks have entered bear-market territory. WSJ’s Gunjan Banerji explains what it takes to push stocks back into a bull market and why it is hard to predict when they’ll turn around. Illustration: Jacob Reynolds

“The equity market is paying attention to this perpetual ratcheting higher of terminal rates in the U.S.,” said

Charles Diebel,

head of fixed income at Mediolanum International Funds. “The more the terminal rate goes up—while necessary to deal with the inflation threat—the bigger the economic downturn will be.”

On the economic front, data Tuesday showed that companies reduced durable goods orders for a second straight month. Home prices continued to notch big year-over-year gains, but the pace of that growth slowed. Home prices fell month over month.

However, consumers are growing more optimistic about the U.S. economy. The Conference Board’s consumer-confidence index increased in September for the second month in a row, lifted in part by falling gas prices.

Bond prices continued to fall, pushing up yields. The yield on the 10-year Treasury rose to 3.963%, once again hitting its highest level since 2010.

Traders worked on the floor of the New York Stock Exchange on Monday.



Photo:

REUTERS

Oil prices rebounded after slumping Monday to their lowest level since January. Brent crude, the international oil benchmark, rose 2.6% to $86.27 a barrel. 

Global stock markets were mixed. The Stoxx Europe 600 edged down 0.1%.

In Asia, stocks closed mostly higher. Japan’s Nikkei 225 index rose 0.5% while China’s Shanghai Composite rose 1.4%. Hong Kong’s Hang Seng Index ended the day close to flat.

Write to Will Horner at william.horner@wsj.com

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Business

Stocks Waver After Suffering Worst Day Since June 2020

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U.S. stocks wobbled between small gains and losses Wednesday, coming off a wild day of trading spurred by a stronger-than-expected inflation report.

The S&P 500 dropped 0.1%, a day after the benchmark index plummeted 4.3% in its worst selloff since June 2020. The Dow Jones Industrial Average fell 0.3%, while the tech-focused Nasdaq Composite gained 0.1%.

The release of U.S. inflation data for August on Tuesday spurred volatile moves across asset classes. The consumer-price reading showed the core inflation index, which excludes volatile energy and food figures, increased last month from a year earlier—indicating that broad price pressures strengthened.

The hot inflation report curbed investors’ hopes the Federal Reserve might slow its aggressive pace of interest-rate increases. That led traders on Tuesday to dump stocks across all sectors, sell bonds and cryptocurrencies, and push the U.S. dollar higher.

On Wednesday, markets seemed to take data measuring U.S. suppliers’ prices in stride. The producer-price index, which measures what suppliers are charging businesses and other customers, declined 0.1% from the month before, in line with economist expectations.

“We witnessed violent moves in the market yesterday as we reprice Fed and economic risk expectations,” said

Megan Horneman,

chief investment officer at Verdence Capital Advisors. “Today we’re absorbing such a destructive day.”

The latest U.S. inflation data curbed investors’ hopes the Federal Reserve might slow its aggressive pace of interest-rate increases.



Photo:

Julia Nikhinson/Associated Press

Some of Tuesday’s sharp market moves started to unwind Wednesday. The WSJ Dollar Index lost 0.4%, after notching its largest one-day jump since March 2020. Brent crude, which fell the day before, rose 1.3% to $94.32 a barrel.

Energy stocks rose broadly as Brent crude rebounded. The sector was the top gaining segment of the S&P 500 on Wednesday.

Among the top individual gainers in the S&P 500,

Starbucks

rose 5.8% after the coffee chain raised its longer-term financial outlook. The company now sees adjusted earnings-per-share growth over the next three years of 15% to 20%, up from its previous forecast of 10% to 12%.

Also making the index leaderboard,

Moderna

shares climbed 5.1% after its CEO told Reuters the company is open to supplying Covid vaccines to China.

Shares of railroad operators declined as a possible freight labor strike looms. The White House is assessing how other transportation providers could fill potential gaps in the nation’s freight network as labor unions and railroads continue contract talks.

Union Pacific

lost 4.9%, and

CSX

fell 3.1%.

Few market watchers were willing to suggest that volatile market moves may be in the rear-view mirror—especially until the Fed’s next meeting.

The Fed will make its next interest-rate policy decision next week. Federal-funds futures, used by traders to bet on interest-rate moves, showed a 68% chance that the central bank will lift rates by 0.75-percentage point. The data also show traders are assigning a 32% probability that the Fed will increase interest rates by 1 percentage point, according to CME Group data.

U.S. Treasury yields continued their upward climb, in another signal that investors are expecting higher interest rates.

The yield on the 10-year U.S. Treasury note rose to 3.427%, from 3.422% Tuesday. The yield on the two-year note, which is more sensitive to near-term rate expectations, climbed to 3.789%, from 3.754%. Yields and bond prices move in opposite directions. 

Some investors and strategists said the market may have overreacted Tuesday, especially after Fed Chairman

Jerome Powell

already said last month in Jackson Hole that the central bank must continue raising interest rates until it is confident inflation is under control.

“You’ve got this tension with dip buyers versus those who are selling the rally,” said Viraj Patel, global macro strategist at Vanda Research. “I think you can paint a very nice bullish picture and find plenty of evidence to buy equities, and you can paint a very nice bearish picture and find plenty of evidence to sell. That naturally means we are going to bounce around for a bit.”

Overseas, global indexes fell, following the U.S. stock market’s performance Tuesday. In Europe, the pan-continental Stoxx Europe 600 lost 1%. London’s FTSE 100 fell 1.2%, after U.K. inflation data showed that core consumer prices ticked up to 6.3% in August, from 6.2% in July, even as inflation eased slightly overall

In Asia, Hong Kong’s Hang Seng Index lost 2.5%, and the CSI 300 index of the largest stocks listed in Shanghai and Shenzhen was down 1.1%. Japan’s Nikkei 225 tumbled 2.8%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Dave Sebastian at dave.sebastian@wsj.com

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Business

Stocks Fall on Hotter-Than-Expected Inflation Data

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The Dow Jones Industrial Average slumped more than 1,000 points Tuesday after hotter-than-expected inflation data dashed investors’ hopes that cooling price pressures would prompt the Federal Reserve to moderate its campaign of interest-rate increases.

Investors sold everything from stocks and bonds to oil and gold. All 30 stocks in the blue-chip average declined, as did all 11 sectors in the S&P 500. Only five stocks in the broad benchmark were in the green in recent trading. Facebook

 

META -9.36%

parent

Meta Platforms

dropped 8.3%,

BlackRock

declined 7.2% and

Boeing

fell 6.4%.

The 3.3% tumble in the Dow put the index on pace for its worst day since May. The S&P 500 declined 3.7%, while the Nasdaq Composite slid 4.5% as rate-sensitive technology stocks took a heavy beating.

The Dow is off 14% in 2022, while the S&P 500 is down 17% and the Nasdaq Composite has fallen 25%.

Investors had eagerly anticipated Tuesday’s release of the consumer-price index, which provided a last major look at inflation before the central bank’s interest-rate-setting committee meets next week. Expectations for the path of monetary policy have held sway over the markets as investors factor higher rates into asset prices and try to project how well the economy will hold up as rates rise.

“It increases the probability of recession if the Fed has to move more significantly to address inflation,” said Chris Shipley, chief investment strategist for North America at Northern Trust Asset Management.

The consumer-sentiment index and the consumer-confidence index both try to measure the same thing: consumers’ feelings. WSJ explains why the Federal Reserve is keeping a close eye on consumer confidence in 2022. Illustration: Adele Morgan

The new data showed the consumer-price index rose 8.3% in August from the same month a year ago. That was down from 8.5% in July and 9.1% in June—the highest inflation rate in four decades.

The figures show inflation is easing, but at a slower pace than investors and economists had anticipated. Economists surveyed by The Wall Street Journal had been expecting consumer prices to rise 8% annually in August.

Analysts had hoped that officials would consider easing their pace of interest-rate increases if data continued to show inflation subsiding. The data undercut those hopes, seeming to settle the case for the Fed to raise rates by at least 0.75 percentage point next week. After the release, stock futures fell, bond yields rose and the dollar rallied.

Traders began to consider the possibility that the central bank will raise interest rates by a full percentage point next week.

As of Tuesday afternoon, they assigned a 28% probability to a 1-percentage-point increase at that meeting, up from a 0% chance a day earlier, according to CME Group’s FedWatch Tool.

The market-based probability of a half-percentage-point increase, by contrast, fell to 0% from 9% on Monday, according to the CME data.

The most likely scenario remained an increase of 0.75 percentage point.

Beyond next week, the suggestion that inflation is sticking around raises the possibility that the Fed might ultimately raise rates higher than markets had been anticipating.

“That’s really the challenge,” said Matt Forester, chief investment officer of Lockwood Advisors at BNY Mellon Pershing. “The Fed might have to do a lot more work in order to contain inflation.”

Food prices have surged as part of a broader pickup in U.S. inflation.



Photo:

michael reynolds/EPA/Shutterstock

Fed Chairman

Jerome Powell

said earlier this month that the central bank is squarely focused on bringing down high inflation to prevent it from becoming entrenched as it did in the 1970s.

The reaction to the new inflation reading could be seen across asset classes.

The communication services, technology and consumer discretionary sectors of the S&P 500 all fell more than 4.5%. Semiconductor stocks were particularly hard hit:

Western Digital,

Nvidia,

Advanced Micro Devices

and

Micron Technology

declined more than 7%.

In bond markets, the yield on the benchmark 10-year U.S. Treasury note jumped to 3.429% from 3.361% Monday. Yields and prices move in opposite directions. The rise in bond yields was an additional sign that investors were expecting higher interest rates after the data. 

Brent crude, the international benchmark for oil prices, fell 0.9% to $93.17 a barrel. Gold prices declined 1.3%.

The U.S. dollar, by contrast, rallied Tuesday. The WSJ Dollar Index, which measures the greenback against a basket of other currencies, rose 1.3%. The strong dollar has weighed on the value of other currencies against the greenback this year.

Overseas, the pan-continental Stoxx Europe 600 fell about 1.5%. In Asia, major indexes closed mixed. South Korea’s Kospi Composite rallied 2.7% , while Hong Kong’s Hang Seng declined 0.2%. 

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Karen Langley at karen.langley@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Stocks Head for Fifth Straight Day of Declines

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U.S. stocks fell, putting indexes on course to fall for a fifth consecutive day, as investors continued to brace for higher-for-longer interest rates. 

The S&P 500 shed 1% Thursday, while the Nasdaq Composite dropped 2.1% and the Dow Jones Industrial Average lost 0.4%. The major indexes suffered their fourth day of losses Wednesday, continuing a selloff that saw them end August with declines of between 4% and 5%.

The first trading day of a new month often sees stocks rise as investment plans inject new money into the market. But right now the market is looking at relatively strong economic reports, like this morning’s jobless-claims data, and expecting they will compel the Federal Reserve to keep raising rates aggressively, said Thomas Hayes, chairman of Great Hill Capital.

“The bears are going to be in control until the 13th,” he said, referring the date of the next inflation report.

Comments from Federal Reserve Chairman

Jerome Powell

last week that doubled down on his message that interest rates must continue rising to tame inflation—even if the economy suffers—have sent stocks tumbling. The declines have reversed much of the gains made during a summer rally that had lifted stocks and bonds from their lows. 

The fall has come as investors reassessed hopes that the Fed could soon ease off from its campaign of interest-rate increases. Instead, many are girding for a lengthier period of higher interest rates, though expectations of when the Fed will start cutting interest rates are likely still too hopeful, said

David Donabedian,

chief investment officer of CIBC Private Wealth US.

“There was too much Fed optimism. The idea that the Fed was getting close to the end of tightening and would begin cutting rates next spring never really made sense to us,” he said.

“I feel a bit more optimistic about the market now over the next three to six months. There has been a reality check and a reassessment of expectations, and I prefer it when the market is in a sober mood rather than a euphoric one,” he said. 

Yields on benchmark U.S. government bonds climbed to their highest levels since June. The yield on the 10-year Treasury note rose to 3.264% from 3.131% on Wednesday. 

Thursday’s data provided new clues on the health of the economy and the employment market ahead of Friday’s highly-anticipated jobs report. U.S. workers’ filings for unemployment benefits fell last week, suggesting layoffs are holding at a low level in a tight job market.

And a survey of U.S. manufacturing activity for August came in stronger than expected. The ISM Manufacturing PMI came in at 52.8, even with July and above expectations of 51.8.

In corporate news, shares of

Okta

fell 35% after the company disclosed some merger integration issues after its acquisition of Auth0, including a higher rate of employee attrition.

Nvidia

fell 12% after the company said it could lose as much as $400 million in quarterly sales after the U.S. imposed new licensing requirements on shipments of some of its most advanced chips to China.

Bed Bath & Beyond

lost 8% after the company said it would close roughly 20% of its namesake stores, cut its workforce and sell stock to raise money to stabilize the business.

In commodity markets, oil extended a streak of declines, falling for a third consecutive day, as worries about global demand mount. U.S. crude futures fell 3% to $86.88. 

Fresh Covid-19 lockdowns in China are threatening to weaken oil demand, adding to jitters about flagging global growth. China’s city of Chengdu with a population of 21 million became the latest to impose restrictions, ordering residents to stay at home from Thursday afternoon, with citywide Covid testing planned through Sunday. 

In foreign exchange, the WSJ Dollar Index was up 0.8% at 101.01. That put the index on course for its highest end-of-day reading since April 2002, according to Dow Jones Market Data. Concurrently, the yen fell to 140.19 against the dollar, its weakest level against the dollar since 1998.

Metals prices are also slumping, dragged down by the stronger dollar—which makes dollar-denominated metals more expensive for holders of other currencies—and rising real yields. As August ended, gold reached its longest monthly losing streak since 2018, while copper hit its longest monthly losing streak since 2008. Both metals fell Thursday by 1% or more. 

Major U.S. stock indexes closed out August with losses of 4% or more.



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Michael M. Santiago/Getty Images

Overseas, major indexes fell across the board. In Europe, the pan-continental Stoxx Europe 600 retreated 1.8%, led by losses among mining and resource stocks.

In Asia, stocks closed lower, with Japan’s Nikkei 225 shedding 1.5% and the Hang Seng in Hong Kong dropping 1.8%. In mainland China, the Shanghai Composite lost 0.5%.

—Raffaele Huang contributed to this article.

Write to Will Horner at william.horner@wsj.com

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Business

Stock Futures Fall After Powell’s Hawkish Remarks

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U.S. stock futures fell and Treasury yields jumped to start the week, as investors remained rattled by the Federal Reserve’s resolve to keep fighting inflation even if it causes some economic pain.

Futures tied to the S&P 500 dropped 0.8%, putting the benchmark index on pace to extend its 3.4% loss on Friday. Contracts for the Dow Jones Industrial Average lost 0.8%, while those tied to the tech-focused Nasdaq-100 sank 1%.  

Monday’s declines before the opening suggest U.S. stocks will likely see another turbulent day of trading, as traders assess Fed Chairman

Jerome Powell’s

comments from last week. Speaking Friday in Jackson Hole, Mr. Powell said the U.S. central bank must continue raising interest rates and keep them at an elevated level, until it is confident inflation is under control.

The comments unsettled investors, many of whom had begun to wager that this year’s historically large rate increases were in the rearview mirror. Many had expected that, starting in September, the Fed would slow the magnitude of its interest-rate increases, until eventually cutting rates next year.

Friday’s comments reshuffled those expectations. On Monday, federal-funds futures, used by traders to place wagers on the course of interest rates, showed a nearly 65% chance that the central bank would lift interest rates by 0.75 percentage point for a third time in a row in September. That is up from 28% a month ago, according to CME Group data.

“The market kind of got ahead of itself over the last three, four weeks or so…in terms of pricing in a possible Fed pivot to a more dovish stance,” said Clara Cheong, a global market strategist at J.P. Morgan Asset Management.

Investors’ growing jitters stand to further unwind a rally that had sent stocks climbing from their 2022 lows reached in June. Already, all three major U.S. indexes have seen their August gains wiped out. Many investors are betting on further pain ahead, with net short positions against S&P 500 futures recently reaching levels not seen in two years.

In premarket trading Monday, many of the S&P 500’s biggest losers were companies that had risen sharply amid the stock market’s summer rebound.

Tesla

fell 1.7%, while

PayPal Holdings

lost 1.6%. Economically sensitive stocks also took a beating before the opening bell, with

Las Vegas Sands,

Alaska Air Group

and Royal Caribbean all falling 1.8% or more. 

“It’s game-changing. We’re coming from a world where people were looking for a Fed pivot, but they got a pivot in the wrong direction,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers, who noted he began lowering his exposure to stocks last week as volatility rose. “We are not defensive yet, but our exposure remains cautious.”

Investors’ risk-off sentiment rippled around the globe and across asset classes. The pan-continental Stoxx Europe 600 dropped 0.9%, following indexes in Asia lower. Bitcoin fell 3.5% from its 5 p.m. ET level on Friday to about $19,942 according to CoinDesk.

U.S. Treasury yields climbed further as a selloff in government bonds gathered pace. The yield on the two-year Treasury note, which is more sensitive to near-term Fed policy expectations, rose to 3.435%, from 3.391% Friday. 

The 10-year Treasury yield rose to 3.091%, from 3.034%. High U.S. short-term yields relative to long-term yields—also known as an inverted yield curve—have in the past signaled a significant risk of a recession.

Oil prices rose, with Brent crude gaining 1.2% to $100.24 a barrel, buoyed by expectations of supply curbs.

In Asia, major indexes ended mostly lower. Japan’s Nikkei 225 fell 2.7%, South Korea’s Kospi dropped 2.2% and Hong Kong’s Hang Seng lost 0.7%. The Shanghai Composite was a rare bright spot, rising 0.1%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Dave Sebastian at dave.sebastian@wsj.com

All eyes on a television broadcast of Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Economic Policy Symposium on Friday.



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Business

Tech Stocks Lead Market Lower as Investors Await Inflation Data

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U.S. stock indexes were lower Tuesday as investors monitored earnings reports and economic data ahead of inflation figures due later in the week.

The S&P 500 slipped 0.7%, a day after the broad index finished with modest losses. The Dow Jones Industrial Average slid 0.4% while the technology-heavy Nasdaq Composite fell 1.5%.

Investors await consumer-price data on Wednesday that could set expectations for how the Federal Reserve will approach monetary policy at its coming meetings. In recent weeks, better-than-expected corporate earnings and strong labor-market data have eased concerns about an imminent U.S. recession, helping stock markets rebound from their lows. 

With inflation running at a multidecade high, investors say Wednesday’s consumer-price index update will be key to the outlook for rates and the direction of the market. 

“The market has enjoyed a risk-on environment since the lows of mid-June, and investors interpreted Chair [Jerome] Powell as more dovish than he had hoped at the last Federal Reserve meeting,” said Quincy Krosby, chief global strategist for LPL Financial. “But today’s market is tomorrow’s market—Wednesday’s inflation data will provide a clearer picture as to whether this bear market is truly behind us.”

According to Ms. Krosby, inflation is the No. 1 concern for the market, including not only whether it is subsiding, but how quickly.

Earnings season is winding down, though some major companies are still set to report figures. Roblox, Coinbase Global and Wynn Resorts will release results after markets close. Chip maker

Micron Technology

fell 4.7% Tuesday after issuing a revenue warning, just a day after

Nvidia

offered similar preliminary guidance.

Norwegian Cruise Line Holdings

fell 11% after reporting a wider-than-expected quarterly loss. Shares of peer cruise line

Carnival Corporation

fell 5.7% as the pockets of the travel sector struggle to recover from its pandemic lows.

Energy stocks gained 1.7% in the morning session, led by shares of Occidental Petroleum which advanced 4.4% on the back of news Monday that Warren Buffett’s Berkshire Hathaway took its stake in the company past the 20% mark.

Traders worked on the trading floor at the New York Stock Exchange on Monday.



Photo:

ANDREW KELLY/REUTERS

Brent crude prices flip-flopped in Tuesday trading, swinging 1.8% in either direction. Barrels of the crude benchmark lurched into positive territory early in the morning after Moscow cut the flow of oil through a pipeline to Europe, and last traded nearly flat at $96.62 per barrel.

“Oil prices are still driven by the near-term macroeconomic outlook,” said

Robert Thummel,

managing director and senior portfolio manager of TortoiseEcofin. “Concerns remain that the Federal Reserve will continue slowing the economy if Wednesday’s inflation data comes in higher than expected, but markets still see persistent undersupply and high demand as creating upward pressure on oil prices.

Data released Tuesday showed U.S. labor productivity declined for a second straight quarter while labor costs were more elevated than economists expected.

The yield on the benchmark 10-year U.S. Treasury note edged up to 2.800% from 2.763% on Monday, while the two-year yield rose to 3.263% from 3.214%. With shorter-term yields significantly above longer-term ones, the yield curve remains inverted, a key recession indicator.

Overseas, the Stoxx Europe 600 fell 0.7%, with losses led by travel and technology firms. In Asia, stock markets were mixed. In Japan, the Nikkei 225 fell 0.9% while in China, the Shanghai Composite Index rose 0.3%. In Hong Kong, the Hang Seng Index weakened by 0.2%.

Write to Will Horner at william.horner@wsj.com and Eric Wallerstein at eric.wallerstein@wsj.com

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Business

Stocks Pare Gains With Earnings in Focus

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U.S. stocks wavered Monday as investors reviewed a series of earnings reports for insight into the impact of higher inflation on companies and consumers.  

The S&P 500 was down 0.2%, as the broad-market index shed some ground after morning gains. The Nasdaq Composite also ticked down 0.1%, after earlier flirting with a potential exit of the recent bear market. The Dow Jones Industrial Average was roughly flat.

Tech giant

Nvidia

declined 8.7% after reporting preliminary quarterly revenue that came in below analysts’ forecasts. The company said it expects challenging market conditions to persist in the third quarter.

Palantir Technologies

fell 12% after it issued guidance that missed Wall Street’s estimates.

Stocks have swayed in recent days, buffeted by shifting views on central bank policy. Friday’s better-than-expected jobs report divided investors and analysts. Some raised concerns that the Federal Reserve could continue raising interest rates aggressively, while others questioned whether the U.S. economy could really be in recession. 

“Markets are still digesting the payrolls report from Friday. When you see what’s happening in the labor market, this doesn’t look like a recession in the sort of broad sense,” said

Kiran Ganesh,

a multiasset strategist at UBS. “Investors seem to be in the mood to listen to the good news.”

Trading volumes also tend to be lower in August while many traders take summer vacations, which can drive outsize moves, analysts said. For those still in the office, investors are awaiting U.S. inflation data for July out on Wednesday, a key release which is expected to provide more direction for markets.

“Clearly today, markets are showing a glass half full and they’re focusing a little bit more on the economy doing well and a little less on the Fed being more aggressive,” said

Chris Zaccarelli,

chief investment officer for Independent Advisor Alliance.

Though that could change, Mr. Zaccarelli added, if Wednesday’s inflation data comes in higher than expected.

Mr. Zaccarelli said his firm recently added more healthcare and small and mid-sized technology companies to its portfolios, and has maintained exposure to defensive sectors like consumer staples and utilities. “We were taking less risk early on, now we’re back to probably a neutral position,” he said.

The yield on the benchmark 10-year Treasury note edged down to 2.788% from 2.838% on Friday. The inverted yield curve continued to flash a recessionary signal, with the 2-year yield at 3.214%. 

“What we infer from the bond market is that investors are positioning for a slowdown. Bond markets have started to increasingly price in a higher chance of a 75-basis-point hike in September,” said Karim Chedid, an investment strategist at BlackRock. 

“Despite this, equities have somewhat held up. I think the reasons for it have to do with better-than-expected earnings so far this season,” Mr. Chedid said.

Traders worked on the floor of the New York Stock Exchange on Friday.



Photo:

angela weiss/Agence France-Presse/Getty Images

Berkshire Hathaway

added 0.5% after reporting quarterly results over the weekend. The investment firm’s operating earnings, CEO

Warren Buffett’s

preferred metric, rose although the company posted a net loss.

Tesla

rose 4%. The U.S. Senate passed a bill on Sunday to spend billions of dollars on climate, including the extension of a tax incentive for electric vehicles.

Signify Health

jumped 14% after The Wall Street Journal reported that drugstore chain

CVS Health

is planning to bid for the company.

Global Blood Therapeutics

climbed 4.4% after

Pfizer

agreed to buy the company for $5.4 billion.

Results are due after the closing bell from videogame firm

Take-Two Interactive Software,

vaccine-maker

Novavax,

insurer American International Group and News Corp, which owns The Wall Street Journal. 

Overseas, the pan-continental Stoxx Europe 600 rose 1%. Retail investment firm Hargreaves Lansdown climbed 8% after reporting better-than-expected earnings and raising its guidance for 2023.

Oil prices slipped, with global crude benchmark Brent falling 1% to trade at $93.96 a barrel. 

In Asia, major benchmarks were mixed. The Shanghai Composite Index added 0.3%, while Hong Kong’s Hang Seng Index slid 0.8%. Japan’s Nikkei 225 added 0.3%.

SoftBank reported a record $23 billion quarterly loss driven by the global selloff in tech stocks after markets closed in Tokyo. It said it used some of its

Alibaba

holdings to raise cash from lenders and shore up its finances. Shares of Alibaba fell 1.2%.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

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