U.S. stock indexes ended a volatile session slightly lower on Wednesday after hotter-than-expected producer price inflation data and minutes from the Federal Reserve’s September meeting deepened concerns that policy makers will continue to aggressively tighten monetary policy.
On Tuesday, the Dow eked out a gain of 36 points, or 0.1%, while the S&P 500 declined 0.7% and the Nasdaq Composite dropped 1.1%.
What drove markets
The 12-month rate of producer price inflation slowed to 8.5% from 8.7% while the annual core rate, excluding food and energy, was unchanged at 5.6%, but the monthly rate rose 0.4% in September, above forecast, and the monthly core PPI was also up 0.4% in September.
Such data has worsened fears that to curb inflation, the Fed will continue its aggressive rate hikes, which may steer the U.S. economy into a recession.
Fed officials worried about the ongoing and “unacceptably high” inflation as it “had not yet responded appreciably to policy tightening”, minutes of the central bank’s last meeting showed on Wednesday.
“Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action,” the minutes said.
See: Fed saw ‘too much action’ vs. high inflation as less risky than ‘too little,’ minutes show
“Ultimately, the Fed is seeking to reduce aggregate demand via a loosening in the labor market, which will reduce wage and services inflation even after the expected near-term disinflation in the goods sector runs its course,” wrote Bob Miller, head of Americas fundamental fixed income at BlackRock, in a note.
“Said more plainly, the pain already evident in some of the most interest rate sensitive parts of the economy (housing), will very likely broaden into more sectors and will intensify with time. Absent a rapid decline in relevant inflation metrics over the next few months, there’s more pain to come,” added Miller.
Traders are awaiting U.S. September consumer prices data on Thursday due at 8:30 a.m. Eastern Time. The…
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