Wall Street’s main indexes fell on Wednesday after latest inflation numbers hit expectations of a bigger interest rate cut by the Federal Reserve, while odds of Democrat Kamala Harris winning the presidency rose following a televised debate.
In recent trading, the Dow Jones Industrial Average slid 478 points, or 1.2%, to 40,258. The blue-chip index had been down nearly 700 points, The S&P 500 lost 0.8%, and the Nasdaq dropped 0.2%.
Consumer prices in the US increased marginally in August, but underlying inflation showed some stickiness, which could discourage the Fed from delivering a half-point rate cut next week.
“The Fed would have liked to have seen softer numbers in order to justify a potential 50-basis point cut at the upcoming meeting … but this (data) probably makes it more likely that they proceed with a 25-bps cut,” Jason Pride, chief of investment strategy and research at Glenmede, said.
The consumer price index (CPI) increased 0.2% last month after climbing 0.2% in July, the Labor Department’s Bureau of Labor Statistics said.
The core figure, excluding volatile food and energy components, rose 0.3% on a monthly basis against forecasts of a 0.2% rise.
Traders now see an 85% chance of the Fed cutting interest rates by 25 basis points, according to CME’s FedWatch.
Market sentiment was also driven by political developments after Harris put her Republican rival Donald Trump on the defensive in a combative presidential debate on Tuesday.
After the debate, pricing for a Trump victory slipped by 6 cents to 47 cents on online betting site PredictIt, while climbing to 57 cents from 53 cents for a Harris win.
Stocks expected to perform well under a Trump presidency fell, with cryptocurrency and blockchain-related shares and prison operators lower. Trump Media & Technology Group slumped 17%.
Meanwhile, solar stocks Sunrun and SolarEdge Technologies, seen as benefiting from a Harris administration, rose more than 7% each.
While the debate offered Wall Street little clarity on key policy issues, some market watchers see Harris’ proposals to raise the corporate tax rate as likely to hit company profits, while Trump’s tougher stance on tariffs could stoke inflation.
Chip stocks kept Nasdaq’s losses in check. The Philadelphia SE Semiconductor index rose 1.2%, led by a 3.5% jump in the shares of industry heavyweight Nvidia.
Among other stocks, GameStop dropped 12% after the videogame retailer said it had filed for an offering of up to 20 million shares and reported lower second-quarter revenue.
Shares of lithium miners jumped after Chinese battery giant CATL said it plans to make adjustments to lithium carbonate production in Yichun based on recent market conditions. Albemarle, one of the largest lithium miners in the world, jumped 13%.
