S&P 500 falls 1.1% after hot inflation as long yields give back a spike
Core prices topped forecasts, technology had its largest one-day decline in 30 sessions, and the long-bond fund still finished higher.
Key takeaways
The S&P 500 fell 1.1% to 7,718.94 on Wednesday, a third straight decline, after a hotter reading on September inflation. The Dow Jones Industrial Average slipped 0.1% to 51,621.48. The Nasdaq Composite fell 1.9% to 26,692.87, and the Russell 2000 fell 1.9% to 2,729.53.
State Street SPDR S&P 500 ETF, ETF:SPY, closed at $769.67, down 1.1%. Invesco QQQ Trust, Series 1, ETF:QQQ, fell 2.0% to $728.95 on its heaviest volume in 20 sessions, a third straight loss that leaves it down 3.8% over five sessions.
The 10-year Treasury yield jumped to 5.329% after the report, then fell 2.7 basis points on the day to 5.19% in late trading, The 30-year yield rose as high as 5.63%, then fell 4.2 basis points to 5.521%, on course for its fourth straight daily decline, Reuters reported.”
A basis point is one-hundredth of a percentage point.
QQQ is down 3.8% over five sessions
- QQQ · 728.95
- SPY · 769.6
Core inflation topped the forecast
The U.S. Bureau of Labor Statistics said at 8:30 a.m. Eastern time that the consumer price index rose 0.6% in September, after 0.4% in August, and 3.7% over the year, up from 3.4%. Gasoline rose 9.1% and accounted for more than half of the monthly increase. The energy index rose 5.2% on the month, after 2.1% in August. Food prices were unchanged, and shelter rose 0.4%, after 0.3%.
Core prices, which leave out food and energy, rose 0.3% for a second month and 2.6% over the year, the bureau said. Yahoo Finance reported that the 0.6% monthly increase matched expectations, while the yearly rate and both core readings came in hotter than forecast. Reuters put those forecasts at 3.6% for the yearly rate, 0.2% for core prices on the month and 2.5% for core prices over the year.
Federal Reserve Bank of Chicago President Austan Goolsbee called the report discouraging in an interview with Yahoo Finance and said the Federal Reserve will get inflation back to its 2% goal, Reuters reported.
"I'm concerned, related to not just the overall number, but if you break out the components, services inflation shows little sign of improvement," he said.
Technology led the sell-off
Reuters reported that hotter-than-expected inflation stirred worries about further Federal Reserve rate increases and sent the Nasdaq sharply lower, pressuring companies tied to the artificial-intelligence buildout that are sensitive to higher borrowing costs.
Traders’ odds of a rate increase at the Fed’s Oct. 27-28 meeting climbed to about 40% from 22% after the report, then eased to about 33% by late afternoon, according to LSEG data cited by Reuters.
CNBC said the S&P 500 was dragged down by hot inflation data and a sell-off in AI-related stocks.
State Street Technology Select Sector SPDR ETF, ETF:XLK, fell 3.0% to $190.43, its largest one-day move in 30 sessions and its heaviest volume in 20, a third straight loss. Nvidia, 14% of the fund, as of mid-September, fell 3.1% to $221.51. BlackRock's iShares Semiconductor ETF, ETF:SOXX, fell 4.5% to $519.42.
Health care and staples rose. State Street Health Care Select Sector SPDR ETF, ETF:XLV, gained 2.5%, and State Street Consumer Staples Select Sector SPDR ETF, ETF:XLP, gained 2.2%, its largest one-day move in 30 sessions. Health care finished 5.5 percentage points ahead of the technology fund.
State Street Energy Select Sector SPDR ETF, ETF:XLE, gained 0.6% and traded at a 52-week high, a third straight gain. Three of the 11 State Street sector funds finished higher.
Only three of 11 sector funds finished higher
BlackRock's iShares Russell 2000 ETF, ETF:IWM, fell 1.9% to $271.37, a third straight decline.
Long yields gave the morning spike back
The 10-year Treasury yield traded as high as 5.329% and closed at 5.191%. Reuters reported that the 30-year yield rose as high as 5.63% before rates pulled back sharply in the afternoon.
BlackRock's iShares 20+ Year Treasury Bond ETF, ETF:TLT, traded as low as $77.74 and closed at $78.89, up 0.7%. BlackRock's iShares 7-10 Year Treasury Bond ETF, ETF:IEF, rose 0.2%.
High-yield bonds stayed flat, despite the increase in Treasury prices. BlackRock's iShares iBoxx $ High Yield Corporate Bond ETF, ETF:HYG, fell 0.4%, while BlackRock's iShares iBoxx $ Investment Grade Corporate Bond ETF, ETF:LQD, rose 0.1%.
Frequently asked questions
What did the September inflation report show?
The consumer price index rose 0.6% in September and 3.7% over the year, and core prices rose 0.3% and 2.6%, with the yearly rate and both core readings hotter than forecast.
Why did technology lead the sell-off?
Reuters reported that hotter inflation stirred worries about further Federal Reserve rate increases and pressured companies tied to the artificial-intelligence buildout that are sensitive to higher borrowing costs.
Did long yields stay at the morning highs?
The 10-year Treasury yield traded as high as 5.329% and closed at 5.191% after rates pulled back sharply in the afternoon.
Which sector funds finished higher?
Health care, consumer staples and energy rose, and only three of the 11 State Street sector funds finished higher.
