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Stocks finished mixed Wednesday, with the focus firmly on consumer inflation data that could sway the Federal Reserve’s next policy decision.
At the closing bell, the Dow Jones Industrial Average (^DJI) fell 0.2%, while the S&P 500 (^GSPC) jumped 0.1%. The Nasdaq Composite (^IXIC) was 0.3% higher after retreating more than 1% during the previous session.
August’s Consumer Price Index report showed a bigger-than-expected jump in inflation last month, with headline prices rising 0.6% month to month and 3.7% on an annual basis. The uptick was driven by the recent rally in energy prices.
The data represents the last inflation print the Fed will get before its meeting next week and one of the most important data points policymakers will consider in deciding whether to keep interest rates higher for longer.
Prices for WTI crude (CL=F) and Brent (BZ=F) oil continued to rise on Wednesday, trading near 10-month highs. That put pressure on stocks as well as potentially hampering the Fed’s efforts to cool inflation.
Eyes are still on the blockbuster Arm IPO, with investors expecting pricing for the offering on Wednesday and trading to start in New York on Thursday. The Softbank-backed British chip designer has opted to accept backing at the top end of its range ($47-$51 a share) or above, according to Reuters sources.
Apple is also in focus after its launch of the iPhone 15 and as China flagged “security incidents” with the smartphone on Wednesday. Officials denied China was moving to curb the use of iPhones in government departments and state-owned companies following reports that helped drive a slide in Apple’s stock.
At the same time, the EU has launched a probe into the subsidy China gives its EV makers in a bid to ward off a flood of cheap imports. Shares in Europe’s auto sector initially rallied after the announcement but lost ground as fears of a Chinese backlash grew.
Stocks close mixed
Stocks closed mixed to end the trading day after inflation accelerated during the month August. The tech-heavy Nasdaq Composite (^IXIC) closed up 0.3% while the benchmark S&P 500 (^GSPC) also gained, up a little more than 0.1%. The Dow Jones Industrial Average (^DJI) remained the only index in the red, closing down 0.2%.
Student loan repayments a worry for retailers
Despite a strong US consumer, retailers still have lingering concerns when it comes to the future.
As Yahoo Finance’s Josh Schafer reports:
Nearly two dozen retailers echoed a similar sentiment at Goldman Sachs 30th annual Global Retailing Conference on Tuesday: The US consumer has been more resilient than they expected in 2023, but there are plenty of catalysts to spark a slowdown ahead.
“The challenges in the marketplace are going to continue,” Lululemon CEO Calvin McDonald told investors on Tuesday.
There are old concerns, like sticky inflation weighing on American consumers’ wallets. And there are newcomers like the end of the student loan moratorium on October 1, which casts doubt on how much Americans will have left to spend on goods after making payments.
Tractor Supply (TSCO), a pandemic darling whose stock has nearly tripled since its March 2020 bottoms, knows it isn’t immune to the potential headwinds lurking. The retailer sells products for home improvement, lawn care and even at-home farming. As the pandemic sparked new hobbies around the house, Tractor Supply’s annual revenue increased from $8.3 billion in 2019 to $14.2 billion in 2022.
Millennials drove those gains, according to Tractor Supply CFO Kurt Burton. But while he says the company’s millennial customer is “more affluent” than the average consumer, the return of student payments is still something he is monitoring.
“The student loan repayment is certainly one that we watch,” Burton said at the conference. “We’re aware of it. And anything that takes money out of the wallet, certainly is harder for the consumer and takes some of that spend away from the goods and services that they spend on. So I think it’s one to be very conscious of.”
Read more here.
ESPN was ‘linchpin’ in Charter-Disney deal
Charter (CHTR) said it needed Disney (DIS) to be “the first mover” in the precedent-setting deal the two companies struck earlier this week after Disney pulled its owned and operated channels, including ESPN and ABC, off Charter Spectrum cable systems in late August.
“We needed them to be a first mover to get us into this transformational model,” Charter CFO Jessica Fischer said at the Bank of America Media, Communications, and Entertainment Conference Wednesday. “Overall, we believe that going forward in the long term, we’ll be able to moderate the growth in content costs for consumers based on what happened in the arrangement with Disney.”
The two companies had hit a stalemate in contract negotiations over whether Disney should give Charter subscribers free access to its ad-supported streaming services as part of the telecom giant’s cable packages. The blackout impacted a slew of high-profile sporting events including the US Open and arrived on the heels of the NFL’s debut — upping the pressure for both sides to make a deal.
On Monday, the companies announced that they had reached an agreement to end the media blackout. As part of the deal, Charter will offer some Disney streaming services — the ad-supported version of Disney+, ESPN+, and ESPN’s yet-to-be-launched direct-to-consumer offering — as part of select cable packages at no additional cost to the consumer.
“[Disney] had the linchpin asset in ESPN,” Fischer said. “You couldn’t move to a new transformational model without ESPN. So because of that, we needed [Disney] to lead, which I think we said often, and it was true.”
Read more here.
Here are some of the stocks leading Yahoo Finance’s trending tickers page in afternoon trading on Wednesday:
Netflix (NFLX): Shares of the streaming giant dropped 3.5% following comments from CFO Spencer Neumann at Bank of America’s Media, Communications, and Entertainment Conference. Neumann said the company is “nowhere near” peak margins as he doubled down on gaming but remained steadfast that there isn’t a path to profits for live sports. He also weighed in on the ongoing Hollywood double strike, saying, “We need to get back to work.”
Moderna (MRNA): Shares climbed roughly 3%, giving up some earlier gains, after the CDC recommended on Tuesday that Americans ages 6 months and older should receive updated COVID-19 vaccine shots. Coupled with that news, the company said it was was scaling down manufacturing of its COVID-19 vaccine to help hit its target of 75% to 80% gross margin growth.
Roblox (RBLX): The stock sank more than 5% after new data from market research firm YipitData showed that August year-over-year growth has decelerated from July. Shares are down nearly 3% year-to-date.
American Airlines (AAL): Shares dropped more than 5% after the airliner slashed its Q3 adjusted profit forecast to account for higher fuel costs, recent drops in airline ticket prices, and other expenses. Spirit Airlines (SAVE) also cut its outlook, echoing similar recent warnings from United Airlines (UAL), Southwest (LUV), and Alaska Air (ALK).
Used car prices moderate as strike impact looms
The monthly prices for used cars and trucks dropped another 1.2% in August after seeing prices fall 1.3% in July, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.
As Yahoo Finance’s Pras Subramanian reports:
New and used car prices are continuing to moderate, which means US consumers may have more flexibility in buying cars. Still, a looming auto strike may dent those prospects.
For the month of August, consumer prices for new autos were up 0.3% compared to July and up 2.9% year over year, with the yearly figure coming down considerably compared to the prior month’s 3.5%. The used car market saw even more moderation, with prices down 1.2% for the month of August and dropping 6.6% year over year. The year-over-year used car figure is notable, as it dropped a full percentage point compared to July.
Car prices, in particular for used vehicles, seem to be coming down faster compared to inflation in the broader economy, which saw overall prices rise 0.6% month over month and 3.7% on an annual basis. The uptick was driven by the recent increase in energy prices.
Used vehicle trends are also coming down at the wholesale auction market, which tracks overall trends that are a precursor to what will be seen at the retail level.
But a looming UAW strike against the Big Three automakers (Ford, GM, and Stellantis), which could happen as soon as Thursday night, could push new car prices higher and may even lift used car prices as well.
Read more here.
Stocks gain in midday trading
Wall Street gained ground during afternoon trading on Wednesday as investors digested the latest reading on inflation, which came in just above expectations but not enough to shift expectations that the Fed will hold rates steady at next week’s much-anticipated policy meeting.
The S&P 500 (^GSPC) rose 0.3%, while the Dow Jones Industrial Average (^DJI) increased about 0.2%, or roughly 60 points. The tech-heavy Nasdaq Composite (^IXIC) advanced almost 0.5%.
Gas-fueled inflation outpaces wage growth
Real average hourly earnings for all employees decreased by 0.5% from July to August, according to the latest data from the Bureau of Labor Statistics released Wednesday morning. While earnings ticked up by 0.2%, the rise in pay was more than offset by a 0.6% increase in consumer prices, the data showed, resulting in an overall decrease in purchasing power.
The inflation uptick was largely driven by rising fuel prices. How wage growth and prices moderate in the weeks and months ahead will play a significant factor in the Fed’s ongoing campaign to tame inflation and highlights the challenge of trying to bring down price increases without triggering a recession.
Economists expect a cooling labor market with tempered wage growth to further slow inflation, allowing the Fed to maintain its policy without several more rate hikes. But rising prices for gas, a necessity for many workers, also underscores the challenges for low-wage earners. “Inflation always impacts lower wage earners more even if their wages are increasing: staples take a larger percentage of the paycheck of a low wage earner,” said Michael Farr, chief market strategist for Hightower Advisors and founder and CEO of Farr, Miller & Washington, in an interview earlier this week. “Since we have seen inflation particularly acute in food, fuel, and rents, the low-wage earner has been pinched.”
The Fed will likely look past inflation uptick
The latest rise in prices won’t be enough to prompt a course change at the Federal Reserve, several economists say, matching Wall Street’s muted reaction Wednesday after the latest inflation data came in slightly hotter than expected.
Consumer prices edged higher in August as a surge in oil prices fueled an uptick in headline inflation, according to fresh data from the Bureau of Labor Statistics. The Consumer Price Index (CPI) rose 0.6% over the last month and 3.7% over the prior year in August, an acceleration from July’s 0.2% monthly increase and 3.2% annual gain in prices. The year-over-year increase was slightly higher than economist forecasts of a 3.6% annual increase, according to data from Bloomberg.
“Ultimately this release showed that there is still real work to be done to get inflation back to the Fed’s 2 percent target,” said Sam Millette, fixed income strategist for Commonwealth Financial Network. “However the higher-than-expected consumer inflation in August is not expected to lead to a rate hike at the Fed’s meeting next week.”
Wall Street’s lukewarm greeting of the latest data suggests the Fed won’t adopt a more hawkish approach to taming inflation at next week’s Federal Open Market Committee and that they’ll continue their wait-and-see approach leading to their next huddle in November.
In a note on Wednesday, Nancy Vanden Houten, the lead US Economist at Oxford Economics, said that she expects the slowing economy, cooling labor market, and moderating wage growth to further decelerate inflation, “allowing the Fed to keep policy steady until it begins to gradually cut rates in mid-2024.”
Here are some of the stocks leading Yahoo Finance’s trending tickers page in morning trading Wednesday.
WeWork (WE): The co-working space provider continued its wild ride, losing 3% following an announcement that the company is attempting to renegotiate nearly all its leases in an effort to remain financially viable. While the stock lost ground Wednesday morning, investors rushed in on Tuesday, more than doubling the value of the stock from last week.
Apple (AAPL): The tech giant fell nearly 1% a day after the debut of its next line of gadgets, including the iPhone 15 and iPhone 15 Pro at its annual fall showcase in Cupertino, Calif. But the latest tech arrives during a challenging time for the smartphone industry.
American Airlines (AAL): Shares dropped 4% after it cut its third-quarter adjusted profit forecast to account for higher fuel costs and expenses related to its new collective bargaining agreement with the ALPA union.
Moderna (MRNA): The drugmaker climbed 6% Wednesday morning after the company announced it was scaling down manufacturing of its COVID-19 vaccine, an updated version of which was approved this week by US regulators. Meanwhile, it said it saw encouraging results for its flu vaccine.
Stocks open slightly higher as inflation comes in just over expectations
Wall Street greeted the latest inflation data with muted acceptance, as consumer prices edged higher in August, driven by a surge in oil prices, registering slightly hotter than expected but seemingly not enough to provoke a strong negative reaction from market watchers.
The S&P 500 (^GSPC) edged higher by about 0.2%, while the Dow Jones Industrial Average (^DJI) increased 0.2%, or roughly 80 points. The tech-heavy Nasdaq Composite (^IXIC) advanced almost 0.3%.
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