Investors digested inflation expectations as stocks fell on Friday, ending a volatile week of trading. There was a decline of 403.89 points, or 1.34%, in the Dow Jones Industrial Average today, closing at 29,634.83. Over the past week, however, it rose by 1.15%. As a result of this loss, the S&P 500 closed at 3583.07 for the seventh time in eight days. Tesla and Lucid Motors each lost 7.55% and 8.61%, respectively, to end the day at 10,321.39 on the Nasdaq Composite.
In the week ending Thursday, the S&P 500 fell 1.55% and the Nasdaq fell 3.11%.
Inflation expectations have increased according to a University of Michigan consumer survey, and the Federal Reserve will likely keep a close eye on it. Stocks fell to session lows after the survey. Growth companies are most susceptible to interest rate increases, so Nasdaq led the decline.
US CPI and Fed’s official response
The yields on US 10-year bonds rose sharply at the same time. In response to higher inflation expectations, government bonds reached 4% for the second time in two days.
Fed officials and investors remain concerned about persistent inflation and central bank tightening, however.
According to UBS Global Wealth Management, with core CPI still moving in the wrong direction and the labor market strong, the conditions for reversing Fed policy, which is a prerequisite for a sustained stock market recovery, are not in place, Mark Häfele, chief investment officer, said in a statement.
“If inflation stays high for longer and the Fed continues to raise interest rates, there is a growing risk that monetary tightening will lead to a recession and erode corporate earnings,” he said.
After opening higher on Friday, the Dow Jones Industrial Average started to decline shortly thereafter. After an early rise, the Nasdaq Composite Index and S&P 500 also reversed their gains. Citigroup (C), Morgan Stanley (MS), and JPMorgan Chase (JPM) all posted gains for investors.
There was a reduction in trading volume on the NYSE and Nasdaq compared to Thursday at the same time.
A barrel of crude oil traded at $86.04 a barrel, down 3.5% from the previous session. Government bond yields rose to 4.02% on Tuesday.
US retail sales data
Despite high inflation, September retail sales show stable spending. Bloomberg polled economists who forecast 0.2% growth. There was a 0.1% increase in non-gasoline retail sales.
“Retail sales surged in September and rebounded in August, suggesting consumers remain optimistic even as overall sales remain flat,” said Sal Guatieri, senior economist at BMO Capital Markets.
The growth in apparel and department stores boosted retail sales by a solid 0.4%, he pointed out, noting that “underlying consumer prices haven’t changed in a month.”
Dow Jones stocks to watch
After beating sales and earnings estimates, Dow Jones stocks leader JPMorgan started the third quarter up 2.6%. Share buybacks will resume next year, the company said.
During the quarter, MarketSmith reported an increase of 11% in earnings per share to $3.12 and a rise of 31% in revenue to $32.72 billion.
Stocks have been trending lower for the last several months, but now they are above the 21-day exponential moving average and struggling to recover the 50-day average.
Aside from the Dow Jones, Wells Fargo (WFC) also reported higher-than-expected sales for the third quarter, but earnings fell short. Shares rose 3.8% in early trading as the stock jumped significantly above its 50-day moving average.
Morgan Stanley also reported a drop in earnings, with a profit of $1.53 per share. In spite of this, revenue of $12.99 billion fell short of expectations of $13.3 billion. Over 4% of shares fell in early trade.
Despite beating earnings and revenue estimates, Citigroup’s earnings per share declined by 25% due to weak investment banking. Early trading showed shares up 1.9%.
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