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Inflation punches Wall Street again, ending knock-down quarter

Stock Markets Sep 30, 2022 04:36PM ET
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© Reuters. FILE PHOTO: People pass by an electronic screen showing Japan's Nikkei share price index inside a conference hall in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato
 
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By Lawrence Delevingne

(Reuters) - Wall Street and global stocks slumped further on Friday, with government bond yields and the dollar holding near recent peaks, as higher-than-expected inflation capped a nasty third quarter for world markets.

Fresh personal consumption expenditures (PCE) price index data, tracked by the U.S. Federal Reserve as it considers more interest rate hikes, showed a rise of 0.3% last month after dipping 0.1% in July. Euro zone inflation also hit a record high of 10% in September, surpassing forecasts, flash inflation data showed.

Fed Vice Chair Lael Brainard said the U.S. central bank would need to maintain higher interest rates for some time as part of its effort to tame inflation and must guard against lowering rates prematurely.

Quincy Krosby, chief global strategist for LPL Financial (NASDAQ:LPLA) in Charlottesville, Virginia, said the new price index data "did little to assuage fears that the campaign to curtail inflation is working as quickly as hoped by the market."

All three major Wall Street indexes finished down around 1.5% after a day of choppy trading.

It was the third consecutive weekly decline for the S&P 500 and the Dow Jones Industrial Average, and all three indexes, including the Nasdaq Composite, were down for the second month in a row.

In the first nine months of 2022, Wall Street suffered three straight quarterly declines, the longest losing streak for the S&P and the Nasdaq since the Great Recession and the Dow's longest in seven years.

Friday's losses cap a week of global market turmoil that saw stocks and currency markets, already rocked by recession fears, sapped further by a U.S. dollar at 20-year highs.

Asian shares outside of Japan fell 0.4% on Friday, down around 13% in September, their largest monthly loss since the start of the pandemic in 2020.

European shares saw some recovery, with Europe's STOXX 600 up 1.3%, but they notched a third consecutive quarter of losses on worry about the impact on global growth of central banks' hiking interest rates to counter inflation.

The MSCI world equity index, which tracks shares in 47 countries, fell 0.85% on Friday, down about 9.8% for the month and 7.3% for the quarter.

"We do not expect a sustainable rally in stocks until the Fed sees clear and multiple months of evidence that inflation is trending down," Andy Tepper, a managing director at BNY Mellon (NYSE:BK) Wealth Management in Wynnewood, Pennsylvania, said in an email.

European government bond yields fell, while Germany's 10-year yield was virtually flat at 2.118%, compared with Wednesday's peak of 2.352%, an 11-year high.

U.S. Treasury yields gained modestly. The yield on 10-year Treasury notes was up 6.9 basis points to 3.817%; the 30-year was up 7.3 basis points to 3.766%, and the two-year, which typically moves in step with interest rate expectations, was up 7.4 basis points at 4.244%.

Goldman Sachs (NYSE:GS) strategists forecasted that the Fed would deliver rate hikes of 75 basis points in November, 50 basis points in December and 25 basis points in February, for a peak rate of 4.5-4.75%, according to a client note released Friday.

The Bank of England will not raise interest rates before its next scheduled policy announcement on Nov. 3 despite a plummet in sterling, but would make big moves in November and December, a Reuters poll forecast.

European Central Bank policymakers have also voiced more support for a large rate hike.

The British pound, which was driven to all-time lows earlier this week on a combination of dollar strength and the government's plans for tax cuts funded by borrowing, rose about 0.35%, but still suffered its worst quarter versus the dollar since 2008.

The dollar index was flat on the day after hitting a 20-year high on Wednesday. The dollar index has risen about 17% this year.

COMMODITIES

Oil prices dipped in choppy trading but notched their first weekly gain in five on Friday, underpinned by the possibility that OPEC+ will agree to cut crude output when it meets on Oct. 5. Brent crude futures fell 0.6% to settle at $87.96 a barrel and U.S. crude tumbled 2.1% to $79.49.

Gold was little changed, wrapping up its worst quarter since March last year, pushed down by fears of ever-higher interest rates.

GRAPHIC - Global markets - Q3 2022

https://graphics.reuters.com/GLOBAL-MARKETS/zdpxolrzdvx/chart.png

Inflation punches Wall Street again, ending knock-down quarter
 

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Comments (16)
CT OREN
CT OREN Oct 01, 2022 1:04AM ET
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I hope the recession will really come. I just worry the government willIntervene to prevent the recession. Let’s pray together for severe recession, just like what happened in 2008.
Francis Lim Wei
Francis Lim Wei Oct 01, 2022 12:15AM ET
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US government is in deep trouble now for their spendings and printing over the past decades, only a big crash and government shutdown can solve the inflation debt issues
Galmoo Gadaa
Galmoo Gadaa Sep 30, 2022 7:12PM ET
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MUSTEFA
Galmoo Gadaa
Galmoo Gadaa Sep 30, 2022 7:12PM ET
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MOHAMMEDNUR
Jay Garrelts
Jay Garrelts Sep 30, 2022 6:48PM ET
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Thanks to Trump and Biden these 2 Einsteins doubled the nation’s money supply
Chad Richer Than You
Chad Richer Than You Sep 30, 2022 5:10PM ET
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Buy & log off
Red Maple
Red Maple Sep 30, 2022 3:00PM ET
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Stocks are on sale. Buy now and in a few years you'll be glad you did.
lakes Tenn
lakes Tenn Sep 30, 2022 3:00PM ET
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or you can buy when it goes down further but you are correct about the few years part because we will have a new administration
First Last
First Last Sep 30, 2022 3:00PM ET
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Timing has a bad track record.  Buy some now then buy more later.
Jim Divers
Jim Divers Sep 30, 2022 2:23PM ET
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You can thank sleepy Joe for all of this!
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lakes Tenn
lakes Tenn Sep 30, 2022 2:23PM ET
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first, everyday you say the same thing and everyday we point out the facts that this is 100% Biden and the Democrats policies that caused this. show some proof we are wrong.
First Last
First Last Sep 30, 2022 2:23PM ET
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lakes Tenn   “Extraordinary claims require extraordinary evidence” was a phrase made popular by Carl Sagan; Laplace's principle: “the weight of evidence for an extraordinary claim must be proportioned to its strangeness”
First Last
First Last Sep 30, 2022 2:23PM ET
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Jim Divers   I never disputed that the market has fallen since Jan 2021.
JIM VETTER
JIM VETTER Sep 30, 2022 2:23PM ET
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lol, gee, you guys never did that to Trump, huh??
First Last
First Last Sep 30, 2022 2:23PM ET
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JIM VETTER  I've never blamed everything on Trump.  There's also Putin, Xi, Kim Jong-un, Maduro, Khamenei, DeSantis, etc.
Mitchel Pioneer
Mitchel Pioneer Sep 30, 2022 2:17PM ET
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2PM breaker fires in flagrant, predictable fashion, as this JOKE of a "market" becomes more fraudulent by the day.  Guess it's time for stocks to "recover in late trade," as the comedy continues in the laughingstock of the financial world.
Buy And Sell
Buy And Sell Sep 30, 2022 2:11PM ET
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Sell all stocks now or go broke!!!
 
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