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Wall Street falls as investors assess inflation data

  • U.S. consumer spending, inflation slow in November
  • Indexes down: Dow 0.21%, S&P 0.23%, Nasdaq 0.65%

Dec 23 (Reuters) – Wall Street’s main indexes fell in thin pre-holiday trade on Friday after data showed inflation cooled further in November, but not enough to discourage the Federal Reserve from driving interest rates to higher levels next year.

A Commerce Department report showed U.S. consumer spending barely rose in November, while inflation cooled further.

The personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose 0.1% last month after climbing 0.4% in October. In the 12 months through November, the PCE price index increased 5.5% after advancing 6.1% in October.

“The good news is the PCE coming down to a 5.5 number. But again, still above what the Fed is expecting and part of the reason why we’ve seen a pop in rates, indicating that the Fed is not yet done with their rate-increasing cycle,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

“The equity markets have it wrong that they think the Fed is going to stop and eventually cut interest rates later in 2023. And right now I don’t see that happening anytime soon.”

On the other hand, a benchmark survey showed U.S. consumers expect price pressures to moderate notably in the next year, with the one-year inflation outlook dropping to the lowest in 18 months in December.

Wall Street indexes sold off sharply in the previous session after data indicated a resilient American economy, fueling worries that the central bank could keep hiking rates for longer.

Market participants stuck to their expectations of a 25-basis point rate hike by the Fed in February, but see the terminal rate hitting 4.9% in May 2023 versus 4.8% before the data on Friday.

Investors have been jittery since last week as the Fed remains stubbornly committed to achieving the 2% inflation goal and projected it would continue raising rates to above 5% in 2023, a level not seen since 2007.

The benchmark S&P 500 (.SPX), with a near 20% fall this year, is on track for its biggest yearly decline since the 2008 financial crisis. The tech-heavy Nasdaq has shed over 33% this year and the Dow (.DJI) 9%.

At 10:12 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 69.67 points, or 0.21%, at 32,957.82, the S&P 500 (.SPX) was down 8.94 points, or 0.23%, at 3,813.45, and the Nasdaq Composite (.IXIC) was down 67.80 points, or 0.65%, at 10,408.32.

Most rate-sensitive megacap stocks such as Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Meta Platforms Inc (META.O) fell more than 1% each.

All the major S&P 500 sector indexes, barring energy, were lower.

Dow Jones parent News Corp (NWSA.O) gained 2% on a report that billionaire businessman Michael Bloomberg was interested in acquiring either Dow Jones or the Washington Post.

Declining issues outnumbered advancers for a 1.26-to-1 ratio on the NYSE and a 1.55-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and one new low, while the Nasdaq recorded 20 new highs and 110 new lows.

Reporting by Shubham Batra, Bansari Mayur Kamdar, Ankika Biswas and Johann M Cherian in Bengaluru; Editing by Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.

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