US benchmark equity indexes experienced a decline on Thursday following the release of official data indicating that consumer inflation accelerated more than anticipated in September. The S&P 500 fell by 0.2%, closing at 5,780.1, while the Dow Jones Industrial Average decreased by 0.1% to 42,454.1, both indexes pulling back from their record highs registered on Wednesday.
Meanwhile, the Nasdaq Composite also dipped 0.1%, settling at 18,282.1. The real estate sector faced the steepest decline among the sectors, whereas energy stocks emerged as the day's gainers. In terms of economic updates, the US Consumer Price Index (CPI) rose by 0.2% last month, maintaining the same increase reported in July and August, as stated by the Bureau of Labor Statistics.
This new figure surpassed the expected 0.1% increase predicted by a survey compiled by Bloomberg. On an annual basis, inflation slightly decreased to 2.4% from August's 2.5%, although it was higher than the Wall Street expectation of 2.3%. A representative from BMO Capital Markets commented, "Inflation still has some spark." As a result, market expectations have shifted regarding the Federal Reserve's policies.
The likelihood of a 25 basis point reduction in the benchmark lending rate next month surged to 86% on Thursday, up from 80% reported a day earlier. Conversely, the probability of rates staying unchanged dropped to 14% from 20%, according to data from the CME FedWatch tool. Last month, the Federal Open Market Committee of the central bank opted for a significant cut in interest rates of 50 basis points, contrary to the consensus from Bloomberg which had suggested a more modest reduction of a quarter percentage point. Investors are keenly waiting for the official US producer prices report for September, set to be published on Friday. Additionally, weekly unemployment insurance applications in the US rose beyond expectations, climbing to their highest level since August 2023, as per government data. The yield on the US two-year Treasury fell by 5.1 basis points to a rate of 3.97% on Thursday, while the 10-year yield remained largely stable at 4.07%. Inflation rates are nearing the Federal Open Market Committee's (FOMC) target of 2%, juxtaposed with a strong economy and a robust labor market, as remarked by New York Fed President John Williams.
Williams elaborated, "Based on my current forecast for the economy, I expect that it will be appropriate to continue the process of moving the stance of monetary policy to a more neutral setting over time," emphasizing that the decisions made by policymakers will stay data-dependent. In commodity news, West Texas Intermediate crude oil surged by 3.6%, reaching $75.87 a barrel.
"Oil prices saw an uptick, propelled by a spike in fuel demand as Hurricane Milton approached Florida, coupled with risks to supply from the Middle East," said D.A. Davidson in a client advisory. In corporate updates, shares of First Solar ($FSLR) plummeted by 9.3%, making it the poorest performer within the S&P 500, as Jefferies adjusted its price target for the stock down to $266 from a previous $271. Delta Air Lines ($DAL) projected a dismal earnings outlook for the fourth quarter, citing anticipated lower travel demand in the lead-up to the US presidential elections in November.
Despite beating revenue expectations, the company's earnings were below market estimates for the prior quarter, resulting in a 1.1% decline in share price at closing. On a brighter note, CrowdStrike ($CRWD) emerged as the leading gainer in both the S&P 500 and the Nasdaq, marking a 5.6% increase. The company announced a collaboration with Plurilock Security to provide a solution for securing crucial infrastructure within democratic economies against cybersecurity threats. Looking ahead, significant banks including JPMorgan Chase ($JPM), Wells Fargo ($WFC), and Bank of New York Mellon ($BK) are scheduled to unveil their latest quarterly results on Friday, alongside asset manager BlackRock (BLK). In precious metals, gold climbed by 0.8% to reach $2,647.80 per troy ounce, while silver showed a remarkable increase of 2.2%, reaching $31.36 per ounce..