US equity indexes fell amid thin trading volumes as hotter-than-expected core inflation boosted the odds of monetary policy tightening and hurt technology behemoths.
The Nasdaq Composite dropped 1.9% to 26,692.87, the S&P 500 slid 1.1% to 7,718.94, and the Dow Jones Industrial Average slipped less than 0.1% to 51,621.48 on Wednesday, as the Bureau of Labor Statistics data showed inflationary pressures were creeping up outside the more volatile food and energy prices.
Nasdaq's trading volume stood at 5.12 billion, compared with its 8.04 billion daily average. S&P 500's corresponding figures were 1.76 billion and 5.05 billion, respectively. The Dow data were 253.8 million and 452.7 million, respectively, at the close of play.
In economic news, the consumer price index jumped 0.6% in September, as expected in a Bloomberg-compiled poll, and from 0.4% in August, according to the BLS. Core CPI climbed 0.3%, above the 0.2% consensus but in line with August's print. Headline and core CPI year-over-year accelerated to 3.7% and 2.6%, respectively, from 3.4% and 2.4%, and beat market expectations.
A 9.1% month-over-month surge in gasoline dominated the headline rate, as expected, Jefferies said in a note, while adding that several upside surprises in core inflation imply higher energy prices are passing through to non-energy goods.
The CME FedWatch tool showed the probability of the Federal Reserve raising its target rate by 25 basis points in October rose to 35% on Wednesday from 22% on the prior day. The market now sees a 29% likelihood of another 25-basis-point increase in December, versus 19% a day ago. It assigns a 33% probability of a move of the same magnitude in March, up from 30% a day earlier, implying three rate increases are possible by the end of Q1 if the Iran war continues after the US midterm elections.
US Treasury yields were mixed, with the two-year rising 1.7 basis points to 4.81%, after clocking 4.95% intraday. The 10-year yield fell 2.3 basis points to 5.19%, after trading as high as 5.33% earlier in the session.
All sectors except healthcare, consumer staples and energy retreated on Wednesday. Technology, communication services, and consumer discretionary led the decliners. The PHLX Semiconductor index slumped 4.3%, its sixth consecutive day of declines adding up to more than 10% cumulative. Eighteen of the bottom 20 were technology names among stocks with market capitalization exceeding $200 billion, according to data compiled by Finviz. Dell Technologies (DELL) led decliners, down 11%.
Bank of America (BAC) was among the worst performers in this mega-cap category, down 4.7%. It reported an unexpected year-over-year drop in Q3 earnings as a regulatory settlement charge weighed while revenue missed consensus.
The Maritime and Port Authority of Singapore said Wednesday a container ship sank in the Strait of Hormuz after being struck by an unknown projectile. Iran is deploying new tactics to target ships sailing through the Strait, two senior Iranian officials told Reuters. The Iran-aligned militant group Houthis vowed to continue attacking Saudi Arabian airports and oil facilities after causing extensive damage to the headquarters of oil giant Saudi Aramco, Reuters reported.
The front-month US West Texas Intermediate crude oil contract advanced 1% to $95.09 per barrel, and global benchmark Brent edged up 0.3% to $106.00 per barrel.
Gold futures sank 1.3% to $4,122.6, and silver futures plunged 6.3% to $55.79.
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