Stock market today: Wall Street falls following hotter-than-expected reading on inflation

Stocks are opening lower on Wall Street and Treasury yields are rising sharply in the bond market after the government reported that inflation in consumer prices remained hotter than expected last month, leaving the Federal Reserve less leeway to deliver the interest rate cuts markets crave. The S&P 500 fell 1.2% in the first few minutes of trading Wednesday. The Dow Jones Industrial Average dropped 481 points, and the Nasdaq composite gave back 1.2%. The yield on the two-year Treasury note, which tends to track expectations for future moves by the Fed, jumped to 4.93%. The government reports figures on wholesale inflation Thursday.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Wall Street marched higher early Wednesday ahead of the government’s update on U.S. inflation which could play into the Federal Reserve’s next interest rate decision.

Futures for the S&P 500 and the Dow Jones Industrial Average each gained 0.2% before the bell.

The latest consumer inflation data will be followed this week by another report on prices at the wholesale level. Investors will also be paying attention to earnings reports from companies including some of the U.S.’s biggest banks.

Early Wednesday, Delta Air Lines share rose 4.1% after the Atlanta carrier reported the highest revenue for any first quarter in its history while earning profits of $37 million. The performance lifted the entire airline sector, with United shares rising 3.6% and American climbing 2.9%.

Honest Company, the online personal care business founded by Jessica Alba, announced that the actress was stepping down as chief creative officer. Late Wednesday, the company posted its first profit since 2021 and shares ticked down modestly lower before the opening bell.

The dominant question hanging over Wall Street is whether inflation will cool enough to convince the Federal Reserve to deliver the cuts to interest rates that traders are craving and have been betting on.

“There’s a palpable sense of nervousness among investors as they exercise a modicum of restraint, concerned about the possibility of hotter-than-expected inflation figures,” Stephen Innes of SPI Asset Management said in a commentary.

Some doubts have crept in following a series of hotter -than- expectedreports on the economy, and traders now expect just two or three cuts to rates this year. Some are even talking about the possibility of zero. That’s down from forecasts at the start of the year for six or seven cuts, according to data from CME Group.

The Fed’s main interest rate is at its highest level in more than two decades and the risk is that rates left too high for too long might cause a recession.

In Europe at midday, Germany’s DAX and London’s FTSE 100 each advanced 0.8%, while the CAC 40 in Paris gained 0.6%.

In Asian trading, Hong Kong’s Hang Seng gained 1.9% to 17,139.17, while the Shanghai Composite index lost 0.7% to 3,027.33 after Fitch Ratings lowered its outlook for China’s public finances.

The report by Fitch cited increased risks due to China’s shift away from reliance on its troubled property sector and rising public debt.

“There is little clarity on reform measures to support medium-term fiscal consolidation,” it said.

China’s Finance Ministry issued a statement saying it regretted Fitch’s decision to downgrade its outlook and insisting that risks from mounting debts were under control.

Tokyo’s Nikkei 225 gave up 0.5% to 39,581.81 and the S&P/ASX 200 in Sydney gained 0.3%, to 7,848.50.

India’s Sensex advanced 0.4% and the SET in Bangkok climbed 0.7%.

Markets in South Korea were closed for an election.

U.S. benchmark crude oil gained 50 cents early Wednesday to $85.73 per barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, it fell $1.20 to settle at $85.23, trimming its gain for the year so far to below 20%.

While a jump in oil prices this year has raised worries about a feedthrough into inflation, oil would likely need to rise “well above levels seen even in the peak Russia-Ukraine commodity price spike for a meaningful impact on core inflation,” the Bank of America strategists said in a BofA Global Research report.

Brent crude, the international standard, was up 53 cents to $89.95 per barrel, after falling 96 cents on Wednesday to $89.42 per barrel.

In currency dealings early Wednesday, the U.S. dollar rose to 151.83 Japanese yen from 151.75 yen. The euro rose to $1.0860 from $1.0857.

On Tuesday, the S&P 500 edged up 0.1% after barely budging the day before. The Dow slipped less than 0.1%, while the Nasdaq composite rose 0.3%.

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