Stocks fall after high inflation report, but are off session lows

Three experts react to September's better-than-expected inflation report

Stocks fell on Thursday morning, but recouped losses from session lows after a key consumer inflation report beat expectations, suggesting the Federal Reserve is likely to continue to raise interest rates sharply.

The Dow Jones Industrial Average fell 80 points, or 0.28%, and also briefly touched its lowest intraday level since November 2020. The S&P 500 fell 0.83% and the Nasdaq Composite fell 1.62%.

Earlier in the day, stocks rebounded from hitting their lowest levels since 2020, led by gains in energy and bank stocks. As oil prices surged, Chevron shares rose more than 3 percent, while banks Goldman Sachs and JPMorgan Chase rose 1.3 percent and 3 percent, respectively.

Stocks fell earlier in the day after the September consumer inflation report beat economists’ expectations. Consumer prices rose 0.4% for the month, beating Dow Jones’s forecast of 0.3%. On an annual basis, inflation rose by 8.2%.

The report showed that inflation remains a persistent problem even with the central bank raising interest rates sharply. Looking ahead, the Fed may have to keep raising interest rates and keep them high until there are signs that inflation is cooling.

Steve Sosnick, chief strategist at Interactive Brokers, said: “A lot of times you can try to find a silver lining in certain numbers — but I can’t. I think that’s why you look at to this truly brutal reaction.”

Stock futures rose in early trade, with sterling up more than 1% against the dollar on reports that the British government may be reconsidering a tax cut plan that eventually exacerbated the pound’s fall to its lowest level in decades in September, keeping global markets on edge .

Thursday’s CPI report came a day after the government said the producer price index, another inflation gauge, rose more than expected.

Investors also digested the minutes of the Federal Reserve’s September meeting released on Wednesday. The minutes of the meeting showed that the central bank is expected to continue raising interest rates until it sees a pullback in inflation. But one comment led some to believe the Fed could slow, if not delay, rate hikes if financial markets continue to turmoil.

Looking ahead, investors will be watching the start of earnings season. On Friday, major banks JPMorgan, Wells Fargo, Morgan Stanley and Citigroup all reported results.

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