US stocks close down despite better-than-feared inflation data

4:05 pm: US equities tank on economic recovery concerns

US stocks closed down despite a better-than-feared inflation reading.

Stocks popped at the open after the August consumer price index, while still showing a significant jump in inflation came in less-than-expected. However, the stock averages turned lower as shares of firms linked to the economic recovery dropped.

On the day, the DJIA fell by 291 points, or 0.83%, to 34,577, while the S&P 500 dropped 0.57% to 4,443. 

And the tech-heavy Nasdaq declined 0.45% to 15,037.

12.05 pm: Dow gives up earlier gains despite a better-than-expected August inflation print  

US stocks were mixed in noon trading, as the Dow continued to pull back even as August’s consumer price index (CPI) rose 0.3% month over month, less than the 0.4% expected and the 0.5% increase seen in July.

At midday, the Dow fell 165 points, or 0.5%, to 34,705, while the S&P 500 eased 4 points at 4,464 and the tech-heavy Nasdaq edged up 45 points to 15,151.     

“What we need to see to be fundamentally markets supportive is a continued easing in the inflation piece without deterioration in the economic outlook,” Charles Schwab (NYSE:SCHW) chief investment strategist Liz Ann Sonders said.

“The next couple of weeks, economic data points become even more important to see whether it confirms the weakness that we saw on the August jobs report or starts to suggest that maybe we’re seeing an improvement,” Sonders added.

Leading the Dow lower were shares of Bank of America Corporation (NYSE:BAC), which fell more than 2%.  

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9.45am: US indices start higher

US benchmarks forged ahead at the bell on Tuesday as traders mulled over a report, which showed inflation last month rising less than had been expected.

The Dow Jones added over 93 points at 34, 963. The S&P 500 gained 11 points at 4,479. The Nasdaq exchange advanced  over 57 points at 15,163.

The consumer prices index (CPI) in August jumped 0.3% month-to-month, or 5.3% from a year earlier, below the 0.4% increase and 5.4% annual gain, which had been expected by economists.

The reading puts back in the spotlight the question of when the Federal Reserve may begin to taper its pandemic-era easy monetary policy, with some seemingly expecting it to be pushed back.

But Fawad Razaqzada, market analyst at ThinkMarkets.com, said: “The markets responded as if this slightly weaker inflation data was going to change the time of the taper. I, for one, don’t expect this to be a game changer.

“The Fed is still likely to announce the start of tapering its bond purchases before the end of the year. We saw falls for things such as air fares, accommodation and used cars. One may argue that if the Fed didn’t worry about these factors rising, surely it won’t make a difference now that they are easing back.”

The Fed begins a two-day policy meeting on September 21.

7.20am: Wall Street set to start flat

Wall Street futures are trading around flat on Tuesday as traders eye the US consumer price index inflation data for August, which will be released at 8:30am ET.

Futures for the Dow Jones Industrial Average are up around 23 points, while the S&P 500 futures are up around three. Contracts for the tech laden Nasdaq index are up around a point.

On Monday, stocks closed mixed and the Dow Jones snapped a five-day losing streak. The DJIA increased by 262 points, or 0.76%, to 34,869, while the S&P 500 rose 0.23% to 4,468. The Nasdaq dropped  0.07% to 15,105.

“US stock markets showed growth-value divergence: the Nasdaq slipped and the Dow and the S&P 500 rallied as the market attempted to consolidate after a run of five straight losses,” commented Neil Wilson, chief market analyst at Markets.com, in a note on Tuesday.

“We saw a bit of a case of futures pumping, cash dumping: i.e. futures rallying but the market selling off on the cash open, which is never a good setup for the market. 

“Futures are weaker today, whilst the US dollar is weaker, sitting in the middle of the recent range, after running into resistance at 92.85 area for the second time in a week,” he added.

This week it seems markets are showing cautious optimism that the economy will recover after mounting fears last week on the Delta variant.

Also in the mix, however, and affecting sentiment, is the idea that the Federal Reserve will soon begin scaling back its asset purchases and begin its much-talked about tapering program.

Five more things to watch on Tuesday:

Shares in oil explorers and oilfield services companies are heading north as crude prices rise for a third straight day with the Brent benchmark reaching the highest level since July this year

Computer software giant Oracle saw shares slip nearly 2% in premarket trading after it reported quarterly revenue after hours Monday, which came in below Wall Street estimates.

Mobile phone and tech titan Apple is set to reveal its latest lineup of iPhones in a virtual talk led by its CEO Tim Cook on Tuesday.

The NFIB small business optimism index for August is scheduled for release at 6 am ET. The optimism index for is expected to fall to 99.0 in August following July’s decline to 99.7.

Wall Street expects infrastructure group Core & Main Inc to report quarterly earnings at $0.27 per share on revenue of $1.18 billion before the opening bell.

Story by ProactiveInvestors