Stock Market Today: S&P 500 Declines as Hot Inflation Report Affects Rate Cut Expectations

The S&P 500 ended the day lower on Thursday, reflecting concerns over stronger-than-expected inflation data, which clouded the potential for Federal Reserve interest rate cuts.

As of 3:02 p.m. ET, the Dow Jones Industrial Average was down 151 points, or 0.4%. The S&P 500 also fell 0.4%, while the NASDAQ Composite decreased by 0.2%.

Inflation Data Weighs on Rate Cut Expectations

In September, the US saw a slowdown in annual headline inflation, yet it exceeded expectations, leaving the Federal Reserve with less motivation to implement aggressive rate cuts. The consumer price index (CPI) remained unchanged at 0.2% in September, surpassing the anticipated 0.1%. This resulted in an annual inflation rate of 2.4%, slightly down from 2.5% in August, but higher than the expected 2.3%.

Core CPI, which excludes food and energy prices and is closely monitored by the Federal Reserve, rose by 0.3%, bringing the annual rate to 3.3%, easily surpassing economists’ predictions of 2.3%.

According to Stifel, "With a renewed focus on inflation, investors seem to be recalibrating their expectations for interest rate cuts, decreasing the likelihood of a significant 50 basis point cut in November and pushing the 10-year yield back above 4% for the first time since July."

Amid a flurry of commentary from Federal Reserve officials, noteworthy remarks came from Atlanta Fed President Raphael Bostic. He expressed openness to a smaller, quarter-point rate cut or maintaining the current rate if inflation and labor market conditions continue to strengthen.

Upcoming Earnings Season Kicks Off; Delta’s Guidance Falls Short

Attention is also shifting to the upcoming third-quarter earnings season, with major banks expected to report their results on Friday. Companies such as JPMorgan Chase, Wells Fargo, and Bank of New York Mellon are set to release earnings, while Goldman Sachs, Bank of America, and Citigroup will do so next week.

Earnings reports from Johnson & Johnson, UnitedHealth Group, and Walgreens Boots are also anticipated early next week.

In the lead-up to these reports, Delta Air Lines’ stock declined by 0.3% after the airline announced fourth-quarter earnings guidance that fell short of analysts’ expectations, which was influenced by a recent computer network outage and pricing challenges due to overcapacity. Delta now expects adjusted earnings per share in the range of $1.60 to $1.85, below Wall Street’s estimate of $1.78.

Focus on Tesla and Other Developments

GXO Logistics saw a gain of over 14% following reports that the company is considering a sale, although no final decision has been made yet.

Tesla’s stock dropped by 1% as investors awaited the unveiling of its robotaxi at a scheduled event.

Meanwhile, Advanced Micro Devices (AMD) fell by 4% at the start of its AI event, showcasing its plans, including new chips aimed at competing with rival Nvidia. AMD announced that it will increase production of its new AI M1325X chip in the fourth quarter and introduced a new server chip along with an AI chip expected to launch in the latter half of next year.

(Peter Nurse and Ambar Warrick contributed to this article.)