US Stocks Slide After CPI Data, Trump-Harris Debate Sparks Uncertainty
US equities began the day with a decline on Wednesday, as investors anticipated the results of a contentious presidential debate between Donald Trump and Kamala Harris, as well as forthcoming inflation data.
The benchmark S&P 500 had declined by 37 points or 0.7% by 09:55 ET (13:55 GMT), the tech-heavy Nasdaq Composite had declined by 29 points or 0.2%, and the 30-stock Dow Jones Industrial Average had declined by 449 points or 1.1%.
The inflation reading has a negative impact on the 50-basis point Fed cut wagers.
Headline In August, US consumer prices increased by 0.2% on a monthly basis, which was consistent with the rate in July. However, the core figure experienced a slight increase, which could potentially undermine the likelihood that the Federal Reserve will implement a more aggressive interest rate reduction at its forthcoming policy meeting.
The monthly headline US consumer price index and the annual figure, which decreased from 2.9% in July to 2.5%, were in accordance with economists’ expectations.
In the interim, the price of “core” consumer goods, which exclude volatile items such as food and petroleum, increased by 0.3% month over month, surpassing expectations of 0.2%. The reading was 3.2% year over year, which was consistent with the predictions and matched the tempo of July.
The inflation figures are released at a time when investors anticipate that the Federal Reserve will reduce borrowing costs from a 23-year peak of 5.25% to 5.5% during its upcoming two-day meeting on September 17-18.
However, investors remain dubious as to whether policymakers will implement a 25-basis point reduction or a more substantial 50-basis point reduction, and uncertainty persists regarding the extent of a potential Fed rate cut. The central bank may adopt a more cautious approach to potential adjustments if it observes persistent inflationary pressures.
In accordance with the FedWatch Tool, which is closely monitored by the CME Group (NASDAQ:CME), the likelihood that policymakers will reduce rates by a quarter-point has increased to 85%, while the likelihood of a half-point decrease has decreased to 15%. The statistics were viewed by markets at 67% and 33%, respectively, prior to the data.
The Trump-Harris debate provides limited policy details.
Donald Trump, the Republican presidential candidate, and Kamala Harris, his Democratic adversary, engaged in a heated debate on Tuesday. The two candidates disagreed on a variety of topics, including the economy and immigration.
Investors were left with a lack of information regarding the ways in which either candidate would address critical issues such as tariffs, taxation, and regulation prior to the highly anticipated event, which occurred at a time when Trump and Harris were tied in national polls.
Trump has pledged to reduce corporate taxes and adopt a more stringent approach to tariffs during the campaign. In contrast, Harris has expressed his intention to increase corporate taxes. While Trump’s proposal has the potential to increase company profits, it may also contribute to inflation, according to analysts. However, they have also observed that Harris’s proposal has the potential to negatively impact corporate returns.
Harris, during the debate, criticized Trump’s policy of imposing high tariffs on foreign products, contending that it would have the effect of taxing the middle class. Trump defended the plan, asserting that it would not result in increased prices for Americans, and criticized Harris for directing a period of elevated inflation during the Biden administration.
On the other hand, analysts at TD Cowen contended that this was “not a debate about the economy.”
“We did not have substantive discussions of the key economic issues including if the White House should play a role in setting interest rates or how tariffs may impact inflation and economic growth,” the analysts wrote in a note to their customers.
Harris’ odds of obtaining the ballot increased from 53% to 56% in the immediate aftermath of the debate, as indicated by data from the online prediction market PredictIt, as reported by Reuters.
Supply concerns have resulted in an increase in oil prices
On Wednesday, oil prices were higher, despite a reduction in some of their earlier gains, as traders awaited the outcome of Hurricane Francine on production in the Gulf of Mexico.
Prices were also somewhat buoyed by industry data that indicated an unexpected weekly decrease in U.S. oil inventories.
However, oil markets were suffering substantial losses as of Tuesday, as the Organization of the Petroleum Exporting Countries’ demand forecast was reduced and Chinese import data was disappointing. This presented a bleak outlook for oil markets.
Brent oil futures expiring in November increased by 0.9% to $69.85 per barrel, while West Texas Intermediate crude futures increased by 1.3% to $66.58 per barrel by 10:03 ET.
