S&P 500 Snaps Losing Streak After Inflation Data

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BlackRock shares rise after revenue, profits beat expectations

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The S&P 500 closed 13.15 points, or 0.3%, up at 4363.80. The Dow Jones Industrial Average ended 0.53 points, or less than 0.1%, down at 34377.81. The tech-heavy Nasdaq Composite rose 105.71 points, or 0.7%, to 14571.64.

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Monetary stimulus, government spending and effective COVID-19 vaccines have helped power the economy and send the S&P 500 up 95% from its March 2020 low. But recent supply-chain problems, rising government bond yields and a rally in oil prices have dampened the mood, sending US stock benchmarks down 3.8% from an early September record.

“We are moving into this middle part of the market cycle, where fundamentals become much more important than macro factors,” said Emily Rowland, co-chief investment strategist at John Hancock Investment Management. “The market is going through some growing pains.”

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The latest economic data on Wednesday took into account inflation concerns. Consumer-price data showed US inflation accelerated slightly in September, up a seasonally adjusted 0.4% from the previous month and a 5.4% annual rate as labor shortages and supply-chain shocks increased prices. Economists had forecast 0.3% growth from August and a 5.3% annual rate.

Investors worry that rising inflation will eat away at corporate profit margins and potentially prompt the Federal Reserve to accelerate its plans to raise interest rates.

“I think the Fed may be forced to raise rates as quickly as possible,” said Carter Henderson, portfolio manager at Fort Pitt Capital Group. “Inflation, in my view, is not transitory.”

The central bank indicated last month that it was ready to reverse its pandemic stimulus programs in November and raise interest rates next year. In meeting minutes released Wednesday, Fed officials reviewed plans to potentially end its asset purchases by the middle of 2022.

Third-quarter earnings season kicked off this week, and investors are parsing the results for signs that supply-chain constraints and higher raw material costs are weighing down profits.

Several household-name companies reported earnings on Wednesday. Shares of BlackRock rose $31.62, or 3.8%, to $867.81 after the money-management company reported revenue and profit that beat analysts’ expectations. JPMorgan’s earnings per share exceeded Wall Street estimates, but shares of the bank fell $4.36, or 2.6%, to $161.

Shares of Delta Air Lines fell $2.51, or 5.8%, to $41.03 after the company posted a quarterly profit but said it faced pressure from rising fuel prices.

“Have we passed the sweet spot of low costs and explosive demand, where demand is softening and costs are rising? We expect some signs of this to emerge,” said Sebastian Mackay, a multiset fund manager at Invesco. “I believe we’ll be in a more rocky patch for equities, where they’ll be going sideways or possibly down a bit.”

The oil-price rally stalled after a report suggested Iran nuclear talks could begin as early as this week, costing some traders a potentially higher supply of crude in the market. Global benchmark Brent crude fell 0.3% to $83.18.

According to Mr McKay, a decrease in demand due to a sharp rise in energy prices could also contribute to stabilization.

“We’re probably entering a phase where prices have risen so fast that we’re getting a demand response now—people are reining in spending and that’s starting to balance the market a bit,” he said.

According to Michael Hewson, a chief market analyst at CMC Markets, more stable oil prices will weigh on market participants’ inflation expectations, at least in the short term.

The yield on the benchmark 10-year US Treasury note ended the trading session at 1.549%, down from Tuesday’s close of 1.579%.

The overseas, pan-continental Stokes Europe 600 gained 0.7%. Major benchmarks in Asia were mixed. The Shanghai Composite Index lost 0.4% while Japan’s Nikkei 225 lost 0.3%. Markets remained closed in Hong Kong due to the storm.

Write to Anna Hirtenstein at [email protected] and Karen Langley at [email protected]

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