Stocks fall after hotter-than-expected inflation data

Stocks extended losses on Wednesday, retreating from this week’s record highs with investors fixing their attention on a key inflation report that showed a greater-than-expected jump in consumer prices last month. 

The S&P 500 Index is coming off its first session of losses following eight straight days of gains, with the Dow and Nasdaq each also pulling back from record-setting runs.

One of the most closely watched reports Wednesday morning was the Labor Department’s Consumer Price Index (CPI) for October, which counterbalanced strong jobless claims that sank to their lowest of the COVID-19 era.

Consumer prices soared 6.2% in October compared to last year, accelerating from September’s 5.4% year-over-year rate. This was a bigger jump than the 5.9% rise anticipated, based on Bloomberg consensus data. And it represented the fastest annual rise in consumer inflation since 1990. 

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The staying power and magnitude of inflationary pressures has become a critical question for market participants, with companies across industries reporting rising input costs and price hikes in order to pass on these expenses and preserve margins. While third-quarter earnings results have showed that S&P 500 companies have largely been able to navigate these cost pressures, the possibility remains that lasting inflation could exert a greater impact, especially if consumers ultimately prove unwilling to pay higher prices. 

“That’s going to be one of the big things going forward, to see whether or not that consumer sentiment can bounce back, whether consumers will be resilient in the face of these price pressures, or whether they’ll start to pull back a bit and decide they’re going to hold off on spending and wait to see when prices come down or at least stabilize before they spend more in the new year,” Yung-Yu Ma, BMO Wealth Management’s chief investment strategist, told Yahoo Finance. 

“So that remains to be seen, and that is a big question mark as we go into 2022,” Ma added. 

Inflation data so far has reflected still-elevated pressures in the recovering economy, even as Federal Reserve officials maintained that the supply-related factors creating these heightened costs would eventually wane. Tuesday’s Producer Price Index from the Bureau of Labor Statistics showed that prices paid to producers jumped by a marked 8.6% in October compared to last year, representing the fastest rise in data extending back to 2010. And last week’s October jobs report showed average hourly earnings jumped 4.9% last month compared to the same period last year, accelerating from September’s 4.6% annual rise. 

Meanwhile, a bevy of companies will report quarterly earnings results, including Disney (DIS), Bumble (BMBL), Wish (WISH) and Beyond Meat (BYND) after market close. 

9:30 a.m. ET: Wall Street opens on a down note

Here were the main moves in markets as of 9:30 a.m. ET:

  • S&P 500 (^GSPC): 4,669.29, -15.96 (-0.34%)

  • Dow (^DJI): 36,305.21, -14.77(-0.04%)

  • Nasdaq (^IXIC): 15,720.30, -166.25 (-1.05%)

  • Crude (CL=F): $83.91 per barel, -$0.24 (-0.29%)

  • Gold (GC=F): $1,857.30 per ounce, +$26.50 (+1.45%)

  • 10-year Treasury (^TNX): +0.43 bps to yield 1.4760%

8:41 a.m. ET: Consumer Price Index posts biggest annual rise since 1990

The Consumer Price Index (CPI) jumped by a much bigger-than-expected margin in October compared to. last month and last year, with inflationary pressures continuing to weigh on the recovering economy.

The CPI rose 0.9% in October over September, the Bureau of Labor Statistics said Wednesday, accelerating from September’s 0.4% monthly rise. Consensus economists were looking for a just 0.6% month-on-month increase in October, according to Bloomberg data. 

Over last year, the broadest measure of CPI jumped 6.2%, or by the most since 1990. 

Energy was a major contributor to the headline jump in CPI, with energy prices up 4.8% month-on-month, and fuel oil prices alone up 12.3%. Groceries also became more expensive, with food at home prices rising by 1.0%. Used car and truck prices rose 2.5% to reverse course after back-to-back months of price drops. The Bureau of Labor Statistics noted that airline fares and alcoholic beverages were two of the only categories to post price declines during the month. 

Even excluding more volatile food and energy prices, consumer prices accelerated markedly last month. This so-called core measure of CPI was up 0.6% on a month-over-month in October, or three times September’s 0.2% rise. And over last year, the core CPI rose 4.6%, or by the most since 1991. 

7:50 a.m. ET: Stock futures point to a lower open ahead of CPI data

Here’s where markets were trading Wednesday morning: 

  • S&P 500 futures (ES=F): -12.5 points (-0.27%), to 4,665.75 

  • Dow futures (YM=F): -57 points (-0.16%), to 36,152.00

  • Nasdaq futures (NQ=F): -82.75 points (-0.51%) to 16,130.00

  • Crude (CL=F): -$0.46 (-0.55%) to $83.69 a barrel

  • Gold (GC=F): -$3.30 (-0.18%) to $1,827.50 per ounce

  • 10-year Treasury (^TNX): +2.5 bps to yield 1.474%

6:02 p.m. ET Tuesday: Stock futures drift lower ahead of inflation data

Here’s where markets were trading Tuesday evening:

  • S&P 500 futures (ES=F): -3.75 points (-0.08%), to 4,674.50

  • Dow futures (YM=F): -33 points (-0.09%), to 36,176.00

  • Nasdaq futures (NQ=F): -16.5 points (-0.1%) to 16,196.25

NEW YORK, NEW YORK – SEPTEMBER 30: Traders work on the floor of the New York Stock Exchange (NYSE) on September 30, 2021 in New York City. In afternoon trading the Dow was down over 250 points as investors continue to worry about inflation, wages and supply chain issues. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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