Inflation Concerns Trigger Rate Hikes, Impacting Wall Street and Economic Outlook

The Wall Street primary indices have witnessed a down closing on Tuesday, forced down by the declines faced by the technology sector. The investors are staying watchful for the primary inflation report, which might be beneficial or play an important role in shaping the Federal Reserve’s next decision on interest rate cuts.

It is seen that the index S&P 500 has experienced only three of its 11 key sectors that have closed their trading session on a positive note as the market anticipated in the November Consumer Price Index (CPI) data, expected to show a slight uptick in inflation from 2.6% in October to 2.7%. This CPI report is said to be one of the important and last indicators before the Fed’s December meeting, which is to be held on the 17th and 18th and is closely watched for its potential impact on monetary policy. The Producer Price Index report, due Thursday, is also expected to provide further insights.

Market looking for inflation report

The investment strategist head of Edward Jones, Mrs. Mona Mahajan, has stated that a cautious sentiment in markets is rising during the release of CPI and PPI data this week. Also, the investors are searching for the price rise reports that will cause any impact in the Federal Reserve’s next decision plan. If we take estimates of the consumer index, then it might indicate a positive ray of hope for the Federal Reserve to lower interest rates by 25 basis points or by 0.25% by the upcoming week of this month. Importantly, these reports are crucial for the Fed’s upcoming decision.

Betting on interest rate cuts

The traders are now more confident in a rate cut and believe that there is an 86% chance of it happening next week, as the CME’s FedWatch Tool shows. This confidence increased after the Friday report since there was a job rectification growth in October and unemployment increased. This data has increased the probability of monetary easing from the Federal Reserve.

Lindsey Bell, chief investment officer at 248 Ventures, praised the S&P 500’s performance so far this year, being up 27 percent, but was, however, expressing some concern over increasing investor caution. As key economic data and the FOMC meeting come near, the markets continue to remain tense as participants try to gauge how the developments may affect monetary policy and the continuation of the market rally.

The current market is cautious

During the strong phase of the market, the investors see a relief, says Lindsey Bell. The current market is focused on shifting towards the signals of the Federal Reserve, especially those that are based on the break in the easing cycle during the upcoming January.

It is seen that the Dow Jones Industrial Average has witnessed a fall of around 154.10 points, or 0.35%, and has ended its trading session at 44247.83; also, the index S&P 500 falls by 0.30% with a point of 17.94 and closes at 6034.91. Meanwhile, the NASDAQ composite experienced a fall in points of 49.45 with 0.25% and settled at 19687.24. However, the communication sector experienced a rise of 2.6%, where the Alphabet shares contributed a tremendous gain of 5.6% after the introduction of their new chip.

Unfavorable condition of tech and real estate

Importantly, it is seen that the sector based on real estate was the biggest loser among the S&P 500 index, where it has experienced a fall of around 1.6%. Similarly, the technology sector has downed by 1.3%, which is its biggest index drop, as these stats are influenced by the fall of 6.7% in Oracle stocks. The Philadelphia index witnessed a fall of 2.5% after China’s claim over the antimonopoly violation made by NVIDIA.

Alaska Airlines is on the rise

The shares of Alaska Airlines rose by 13% after the company increased its earnings for the fourth quarter. Investors were pleased. Boeing rose 5.5% on the report that it started producing 737 Max jets. At the same time, the shares of MongoDB plummeted by 16.9% as the developers managed to improve the expectations for annual results, but investors were not happy and sold their shares. In the mid-cap sector, luxury home builder Toll Brothers reported strong quarterly results only to see their shares decline by 6.9% due to a poor forecast for the current quarter. Such diversity of earnings reports did not allow for uniformity in the behaviour of individual stocks.

Additionally, On the NYSE and NASDAQ, declining issues outpaced advancers. On the New York Stock Exchange, the decliners amounted to 1.88-to-1, with 117 new highs and 42 new lows. The NASDAQ had more advancers, with 1,655 stocks going up while 2,671 went down. The ratio of decliners to advancers was 1.61-to-1. NASDAQ Composites had 87 stocks reaching new highs and 86 making new lows, while in the case of the S&P 500, 10 stocks hit 52 week highs and 3 stocks hit 52 week lows. The total turnover of trade within the U.S. exchanges was 13.35 billion shares compared to the daily average of 14.35 billion shares over the last 20 sessions, which is a reduction in activity levels.