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S&P 500 Stumbles as Signs of Higher for Longer Inflation Add to Fed Fears

Published 10/14/2022, 01:36 PM
Updated 10/14/2022, 02:03 PM
© Reuters

By Yasin Ebrahim -- The S&P 500 fell Friday, as data pointing to growing expectations for higher for longer inflation stoked investor jitters further about Federal Reserve rate hikes, pushing tech lower.

The S&P 500 fell 1.7%, the Dow Jones Industrial Average fell 0.9%, or 273 points, and the Nasdaq was down 2.2%.

The University of Michigan showed that the median expected year-ahead inflation rate rose to 5.1%, above the 4.7% seen in September.

A climb in inflation expectations, a closely watched metric by the Federal Reserve, comes just a day after data showed worse-than-feared inflation pressure.  

“[W]e see drivers of disinflation on the horizon, most notably from a reversal in vehicle prices and a downshift in medical services,” Morgan Stanley said. “Risks are tilted towards more Fed tightening this year,” it added.

Treasury yields climbed, with the 10-year yield topping 4%, as the odds for a 0.75% Fed rate hike for November are now almost fully priced in.

Rising rates weighed heavy on growth sectors of the market including tech and consumer discretionary stocks. 

Apple Inc (NASDAQ:AAPL), down 2%, led big tech lower, with Microsoft Corporation (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) down more than 1%.

Major Wall Street banks, meanwhile, kicked off the quarterly earnings season in earnest, with mostly better-than-expected quarterly results. 

JPMorgan Chase & Co (NYSE:JPM) rose more than 2% after reporting better-than-expected third-quarter results, as rising interest rates boosted net interest income offsetting weakness in investment banking revenue.

Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) also reported better-than-expected quarter results, but Morgan Stanley (NYSE:MS) bucked the trend as weaker performance in its investment banking business weighed on results.

Tesla (NASDAQ:TSLA) slumped more than 5% dragging consumer discretionary stocks lower after Wells Fargo cut its price target on the stock to $230 from $280 a share, citing worries about the impact of higher interest rates.

The price cut comes just a week ahead of the electric automaker’s third-quarter results slated for Oct. 19.

In deal news, Albertsons (NYSE:ACI) fell more than 8% on reports that Kroger (NYSE:KR) had agreed to purchase the Safeway owner in a deal valued at $24.6 billion, or $34.10 a share.

Latest comments

The big boys are on the right side of the trade
Transitory, this? Guess someone was lying! ...or...Who could have seen this coming, right?
yesterday there was no fear after bad cpi, but today fear appeared all of a sudden.
PPT resting up after doing God's work yesterday...
You guys are totally correct. Manipulation.
looks like manipulation is taking a break. . the fed can't keep on fake buying forever 🤣
Russian aggression has moved the markets way more than the Fed in last few quarters.
  If you think the Fed does "manipulate the stock markets directly/in collusion then you sadly are mistaken."  Its transactions are in public record.  List the Fed actions and which laws they violated.
you like whatever lollypop the govt gives you.. i can't reason with you 😂
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