US stocks wavered on Thursday after the latest consumer inflation print came in hotter than anticipated, setting up expectations for the path of interest rates.
The Dow Jones Industrial Average (^DJI) slipped 0.1%, while the S&P 500 (^GSPC) hugged the flatline, after both clinched fresh record highs. The tech-heavy Nasdaq Composite (^IXIC) climbed into positive territory after dipping as much as 0.5%.
Chip heavyweight Nvidia (NVDA) climbed more than 1% while e-commerce giant Amazon (AMZN) also rose, helping lift the Nasdaq.
Consumer prices rose 0.2% last month, according to US government data, more than the 0.1% rise Wall Street was expecting. On an annualized basis, prices rose 2.4%, compared with 2.3% expected. The data was of greater interest than usual as investors puzzle over the chances of a “no landing” for the economy after last week’s jobs report revived worries about inflation flaring up again.
But the jobs market provided a surprise of its own on Thursday, as initial unemployment claims rose to 258,000, much more than Wall Street anticipated and the highest print since June 2023.
Amid all the moving parts, traders now see a 15% chance that the Fed will hold rates steady in November, per the CME FedWatch Tool. Just a week ago, the odds of no cut were at 0% as the market heeded policymakers’ message and prepared for a 25 basis point rate reduction.
Earnings season started to pick up steam before the bell with quarterly results from Domino’s (DPZ) and Delta Air Lines (DAL). The pizza chain beat on earnings but missed on revenue, while the airline’s profit sank over 25% year over year in the wake of a global tech outage. Shares fell slightly.
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Mortgage rates spike in biggest one-week jump since April
Yahoo Finance’s Claire Boston reports:
Mortgage rates rose sharply last week, a new challenge for beleaguered house hunters and potential refinancing candidates.
The average rate on a 30-year fixed-rate loan jumped to 6.32% for the week through Wednesday, according to Freddie Mac, up from 6.12% a week earlier. It’s the biggest week-over-week increase since April.
WeightWatchers continues furious rally on new GLP-1 offering
WW International (WW), better known as WeightWatchers, surged more than 15% Thursday. The stock has gone on a furious rally this week following the company’s announcement that it will offer a copycat of weight-loss drugs like those from Novo Nordisk (NVO).
WeightWatchers shares were up 38% Wednesday, and the stock is up nearly 160% from last week but remains far from record highs around $100 in 2018. The company has struggled amid heightened competition in the weight loss space, an unsuccessful rebrand, and disruptions related to COVID-19.
US laws permit companies to sell compounded versions of drugs on the Food and Drug Administration’s shortage list. The federal agency recently removed Eli Lilly’s (LLY) GLP-1 drugs Zepbound and Mounjaro from its shortage list, meaning companies are no longer able to sell compounded versions of those drugs’ active ingredient tirzepatide.
WeightWatchers will sell compounded versions of semaglutide, the active ingredient in Novo Nordisk’s Ozempic and Wegovy.
Oil gains 2% on worries Israel-Iran conflict will impact supply
Oil gained as much as 2% on Thursday as traders assessed whether ongoing tensions between Israel and Iran will result in a supply disruption.
West Texas Intermediate (CL=F) traded above $74 per barrel, while Brent (BZ=F), the international benchmark price, jumped more than 2% to hover around $78 per barrel.
“Crude [is] continuing to find equilibrium value lifting prices today as uncertainty remains over when and where Israel will strike into Hezbollah and Iran,” Dennis Kissler, senior vice president of trading for BOK Financial Securities said in a note on Thursday.
Hurricane Milton’s Florida landfall also kept the markets on edge. Production and refinery activity was not expected to be disrupted. However analysts anticipated an interruption of distribution around the impacted areas, as gas stations ran low on supplies.
CPI bolsters hawkish view that Fed rate cuts need to be gradual
Yahoo Finance’s Jennifer Schonberger reports:
A warmer-than-expected inflation reading released Thursday offers new ammunition for Federal Reserve hawks who are arguing for a gradual pace of interest rate cuts.
This report, according to some Fed watchers, is unlikely to change the path outlined by policymakers for smaller future cuts following an initial 50 basis point reduction in September.
Investors, in fact, boosted the odds that the Fed will trim its policy rate by 25 basis points in November to 87% following the CPI release.
Housing inflation eased in September in ‘sharp reversal’ from previous month
Yahoo Finance’s Hamza Shaban reports:
September’s Consumer Price Index (CPI) report came in hotter than analysts expected, but the data offered one major point of optimism: Shelter cost increases came down during the month, flashing an encouraging economic signal that the most stubborn contributor to inflation may finally be giving ground.
“The sharp reversal in shelter inflation allays fears that it could reaccelerate after the jump in August and brings the trend back toward the gradual disinflation that we continue to expect,” said Parker Ross, global chief economist at Arch Capital Group
The gasoline index decreased 4.1% last month, compared to a decline of 0.6% in the prior month, according to Bureau of Labor Statistics data released Thursday.
On an annualized basis, gasoline prices dropped 15.3%, while the energy index as a whole decreased 6.8%.
Tech stocks decline after September consumer prices rose more than expected
The major averages opened lower on Thursday after the monthly Consumer Price Index (CPI) came in hotter than expected, setting the expectation that the Federal Reserve will opt for a smaller rate cut at its meeting next month.
The Dow Jones Industrial Average futures (^DJI) fell nearly 0.2%, while the S&P 500 (^GSPC) shed roughly 0.3%. Both slipped from their fresh record-high closes. The tech-heavy Nasdaq Composite (^IXIC) also dropped 0.5%.
Technology (XLK) stocks led the declines, followed by Consumer Discretionary (XLY). On the flip side, Energy (XLE) stocks rose as oil jumped Thursday morning.
Investors may be anticipating the Federal Reserve’s next interest rate cut will be 25 basis points rather than 50 after inflation rose by 0.2% in September, more than the 0.1% rise Wall Street was expecting, according to the latest government data.
Delta stock falls after earnings miss, CEO blames CrowdStrike
Delta Air Lines (DAL) reported third quarter earnings that missed Wall Street’s expectations Thursday morning, Yahoo Finance’s Brad Smith reports. The miss sent its stock down as much as 7% in premarket trading before paring losses.
Here’s a look at its performance compared to analyst estimates compiled by Bloomberg.
Adjusted net income: $971 million vs. $981 million expected
Adjusted earnings per share: $1.50 vs. $1.52 expected
Revenue: $14.59 billion vs. $14.68 billion expected
Delta said it forecasts earnings per share of $1.60 to $1.85 for the fourth quarter, with its $1.73 midpoint slightly below the $1.78 Wall Street analysts had expected, according to Bloomberg data.
Delta CEO Ed Bastian blamed disruptions caused by a widespread CrowdStrike outage in mid-July. Issues with CrowdStrike’s cybersecurity software, used by Delta, forced the airline to cancel thousands of flights and wiped $380 million from its revenue for the quarter, he said.
“We had 86 great days and we had five days that were impacted, caused by CrowdStrike,” Bastian told Yahoo Finance.
Jobless claims unexpectedly surge to highest since August 2023
Weekly jobless claims rose more than expected last week in the latest sign that, while the labor market has shown some strength, there is still cooling in the jobs market.
New data from the Department of Labor showed 258,000 initial jobless claims were filed in the week ending Oct. 5, up from 225,000 the week prior and above the 230,000 economists had expected. This marked the highest weekly unemployment claims since August 2023.
Meanwhile, the number of continuing applications for unemployment benefits hit 1.86 million, up by 42,000 from the week prior.
Prices rise more than expected in September
A closely watched report on US inflation showed consumer prices rose more than expected in September, according to the latest data from the Bureau of Labor Statistics released Thursday morning.
The Consumer Price Index (CPI) increased 2.4% over the prior year in September, an acceleration compared to August’s 2.5% annual gain in prices. The yearly increase was higher than the 2.3% economists had expected.
The index rose 0.2% over the previous month, above Wall Street’s expectation for a 0.1% increase.
On a “core” basis, which strips out the more volatile costs of food and gas, prices in September climbed 0.3% over the prior month and 2.4% over last year. Core prices rose 0.3% month over month and 3.2% on an annual basis in August. Both the monthly and yearly core readings were hotter than economists had projected.
