Even as data shows that inflation is easing, Wall Street is falling.
Despite carefully monitored US inflation data showing that the price spike seen in recent months may be receding, Wall Street closed significantly lower and European markets also sank.
Traders had feared that rising inflation would force the Federal Reserve to reduce stimulus measures that had helped equities post massive gains during the economic crisis triggered by Covid-19, but Labor Department data released before US trading opened on Tuesday showed price increases had slowed in August.
“It appears that the Fed may have gotten inflation right,” said OANDA.com analyst Edward Moya, referring to the Fed chairman’s remark that the price surge will be temporary, implying that the central bank will not have to rush to reduce its large asset purchases to alleviate lending conditions.
“An inflation slowdown could be just what they need to justify their taper pause, implying they have a few more months to watch how the labor market rebound plays out.”
The increases in stock prices vanished as traders digested the news, and all major indices registered losses, a now-familiar occurrence in a month notorious for choppy trading.
“It’s normal for the market to take a breather and consolidate. And I believe that’s what it’s doing today more than anything else,” LBBW Bank’s Karl Haeling told AFP.
“However, I have no clue if it will last two more days or two more weeks, or how far it will go.”
Meanwhile, Apple’s stock fell 1% after the company presented the iPhone 13 and its latest watch.
In European markets, London and Paris both closed the day lower, while Frankfurt rose somewhat.
Concerns over struggling property titan Evergrande, which is on the verge of bankruptcy and owes hundreds of billions of dollars, sent Hong Kong and Shanghai down in Asian trading.
The company has warned that it is under “extreme strain” due to a cash crunch that many fear would push it into bankruptcy and have a negative impact on the Chinese economy.
Evergrande’s Hong Kong-listed shares tumbled over 12%, and the company’s stock has lost nearly 80% of its value since the beginning of the year.
Tokyo, on the other hand, had its best year in 31 years, thanks to renewed prospects for Japanese stimulus.
Oil prices have risen sharply, despite the International Energy Agency reporting that global crude demand has fallen for three months in a row due to an increase in Covid cases in Asia.
However, oil demand is likely to pick up in October, according to the report.
New York – Dow Jones Industrial Average: 34,577.57, down 0.8 percent (close)
Washington Newsday Brief News. New York – S&P.