Wall St drops as CPI data boosts Dec rate hike odds

NEW YORK: Wall Street’s three major indexes opened lower on Thursday, shying away from their record high closes, as an uptick in consumer prices inflation boosted the odds of another interest rate hike this year.

A Labour Department report showed consumer price index (CPI) rose more than expected last month and the gain was the largest in seven months, lifting the year-on-year increase to 1.9% from 1.7% in July.

Despite the uptick, both CPI and personal consumption expenditures, the Federal Reserve’s preferred inflation measure, remain stuck below the central bank’s 2% target.

“I don’t think they should raise rates in December, but they will, in order to counteract any kind of slowdown in the overall economy,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

After the data was released, the odds of a hike in December rose to top 50% for the first time since July, from 41.3%, according to CME Group ’s FedWatch tool.

The CPI data is the last to be released before the Fed’s Sept 19-20 policy meeting, where it is expected to outline a programme to start offloading its US$4.2 trillion balance sheet.

At 9:38am ET (1338 GMT), the Dow Jones Industrial Average was down 12.53 points, or 0.06%, at 22,145.65 and the S&P 500 was down 6.62 points, or 0.26%, at 2,491.75.

The Nasdaq Composite was down 33.55 points, or 0.52%, at 6,426.64.

Six of the 11 major S&P sectors were down, with a 0.5% decline in technology index on top of the list. Facebook’s 1.2% fall dragged on the S&P and the Nasdaq the most.

The gainers were led by the energy index’s 0.6% rise after US crude prices hit US$50 per barrel after forecasts for stronger demand by the International Energy Agency.

Apple’s shares fell 0.46%, staying under pressure on concerns about the pricing and delayed availability of the newly launched iPhone X.

Equifax tumbled as much as 8.9% to its lowest level since February 2015 after the Federal Trade Commission opened a probe into the company’s massive data breach.

Hertz Global sank 10.11% after Morgan Stanley downgraded the car rental company’s stock.

United Natural Foods jumped 10.6% on a better-than-expected profit and an upbeat forecast.

Declining issues outnumbered advancers on the NYSE by 1,577 to 937. On the Nasdaq, 1,433 issues fell and 783 advanced. – Reuters