S&P 500 Cuts Some Losses, But Inflation

© Reuters

By Yasin Ebrahim

-- The S&P 500 cut some losses Wednesday, but remained under pressure after an upside surprise in inflation raised the stakes for a larger than expected Federal Reserve rate hike at the July meeting.

The S&P 500 fell 0.41%, the Dow Jones Industrial Average fell 0.69%, or 213 points, the Nasdaq was down 0.16%

U.S. inflation rose 9.1% in June to hit a fresh four-decade high, topping economists' forecast for a 9% rise, driven by an 11.2% leap in gas prices and a 1.0% increase in food prices.

This “will be the last big increase,” Pantheon Macroeconomics said, as margins fall, wage gains slow and commodity prices decline. “But right now this report will make for very uncomfortable reading at the Fed,” it added.

With the Fed’s meeting just two weeks ago, the risk of a larger than expected 0.75% rate hike at the July meeting has gathered pace.

The odds of a 1% rate hike jumped to 46% from just 10% a day earlier, according to ’s Fed Rate Monitor Tool.

Bank stocks, which will be in the spotlight on Thursday as JPMorgan (NYSE:JPM) kicks off the quarterly earnings for major Wall Street banks, were hurt by a deeper inversion in the yield curve, a usual harbinger of a recession.

Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), Citigroup Inc (NYSE:C) were down more than 2%.

The dip-buying in tech was on show once again as big tech stocks pared most of their losses after Treasury yields slipped. 

Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) were down less 1%.

Twitter (NYSE:TWTR), meanwhile, jumped more than 8% after the social media giant sued Elon Musk to prevent him from withdrawing his $44 billion take-private deal.

Stitch Fix (NASDAQ:SFIX) jumped more than 17% after Benchmark Capital’s Bill Gurley bought 1 million shares in the company at a price of $5.43.

On the earnings front, Delta Air Lines (NYSE:DAL) reported quarterly results that missed on the bottom line as rising fuel prices were a drag on margins offsetting better-than-expected revenue. Its shares fell 2%.  

As a court battle between Musk and Twitter looms, the latter appears to have "a strong iron fist upper hand,” Wedbush said, with the stock now “factoring in some significant chance that Musk will ultimately have to pay Twitter a settlement well north of $1 billion.”

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