Wall Street ends lower as investors await US inflation data

What a wild day for nerves with all the indexes wildly gyrating between big sell off and big rallies twice during the session.  Between 11 and 12, the Dow dropped about 250 points, then from 12 to 2:30 rose over 300 points, then dropped 250 points before close, most of it in the final half hour. Some of this was a continuing sell off in the banking sector with the market still reacting to Tuesday’s Moody downgrades. But a larger part was today’s dismal report that July saw an historic high in consumer credit card debt, now past the $1 trillion mark.

As today’s expert put it, “The consumer [as has always been the case] is the backbone of the economy. If they are too stretched and stopped spending, that feeds into a recession narrative.” The day’s good news is that the odds of no September rate hike now stand at 86.5% and, of 443 S&P companies, 78.6% have beaten Q2 expectations (vs 79% on Monday), the bad news being that expectations are down quarter-over-quarter. Volume was a tad above average at 11.06 billion. 

[Editor’s note: 1) The headline states, “Wall Street ends lower as investors await US inflation data.” Yet trading was wild and volume very close to normal, showing no indication that anyone was sitting on the sidelines waiting for more data. Inflation is expected to remain unchanged from June and any more clues involving rate hikes seems to be already settled by the 86% odds of no September hike.  2) It is doubtful that consumer debt is really at an historic high when inflation is considered. People are running up their credit cards because prices are so high, so it’s a good bet that debt is not nearly as bad as it looks when one factors in purchasing power.]

Wall Street ends lower as investors await US inflation data

By Echo Wang

Wed August 9, 2023 4:32 PM

DJ: 35,314.49  -158.64        NAS: 13,884.32  -110.07        S&P: 4,499.38  -19.06      8/8

DJ: 35,123.36  -191.13        NAS: 13,722.02  -162.31        S&P: 4,467.71  -31.67      8/9

Aug 9 (Reuters) - U.S. stocks closed lower on Wednesday, the day after a report showed Americans borrowed more than ever on their credit cards in the last quarter, and a day ahead of U.S. Consumer Price Index (CPI) inflation data that could influence Federal Reserve interest rate decisions.  “The markets today are just kind of waffling around. And the reason for that is tomorrow is going to be the CPI report for July being released”, said Jason Krupa, vice president of asset management at Lenox Advisors.  On Tuesday, the New York Federal Reserve Bank said U.S. credit cards debt surpassed $1 trillion, and Philadelphia Fed President Patrick Harker said the U.S. central bank may be at the stage where it can leave interest rates unchanged.

“With price of oil going up, the consumer is the backbone of the economy. If they are too stretched and they stopped spending, that feeds us more into a recession narrative”, said Gina Bolvin, president of Bolvin Wealth Management Group in Boston.  Traders put the chance of no rate hike at the Fed's next policy meeting in September at 86.5%, according to CME FedWatch Tool. Rate-sensitive megacap growth and technology stocks that have led the Wall Street rally, such as Nvidia (NVDA.O), Apple (AAPL.O) and Tesla (TSLA.O), were down between 0.8% and 4.8%.  The CPI for July, due on Thursday, is expected to show a slight acceleration from last year. On a month-to-month basis, consumer prices are seen increasing 0.2%, the same as in June.  China's consumer sector fell into deflation in July. The consumer price index (CPI) dropped in the world's second-largest economy, the National Bureau of Statistics said, its first decline since February 2021.

The Dow Jones Industrial Average (.DJI) fell 191.13 points, or 0.54%, to 35,123.36, the S&P 500 (.SPX) lost 31.67 points, or 0.70%, to 4,467.71 and the Nasdaq Composite (.IXIC) dropped 165.93 points, or 1.2%, to 13,718.40.  The losses followed a broad selloff on Tuesday, after credit rating agency Moody's downgraded several small and mid-sized banks. On Wednesday, big banks extended those losses with Bank of America (BAC.N) down 0.8% and Wells Fargo (WFC.N) down 1.3%.  Four of the top 11 S&P 500 sectors rose, with energy stocks (.SPNY) leading the gain by a 1.22% jump, touching a near six-month high, tracking a jump in crude oil prices. 

Casino owner Penn Entertainment's (PENN.O) shares surged 9.1% on a $2 billion deal with Walt Disney's ESPN (DIS.N) to launch a sports betting business.  Walt Disney's shares dipped 0.7%, erasing early gains ahead of its quarterly results due after the bell.  Lyft (LYFT.O) shares tumbled 10% despite a strong earnings forecast, as the company signaled it would double down on competitive pricing to catch up with rival Uber (UBER.N). 

Of the 443 S&P 500 companies that have reported results as of Tuesday, 78.6% beat analyst expectations, according to Refinitiv data.  “It could be a little bit of that (the market is ) digesting the fact that we're beating expectations (on earnings) but those expectations have been coming down quarter over quarter”, said Krupa.

Volume on U.S. exchanges was 11.06 billion shares, compared with the 10.89 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.18-to-1 ratio; on Nasdaq, a 1.63-to-1 ratio favored decliners.  The S&P 500 posted 16 new 52-week highs and 7 new lows; the Nasdaq Composite recorded 60 new highs and 178 new lows.