Inflation Worries Drag Major Averages to New 2022 Lows

Barry Adams
12 Oct, 2022
New York City

Volatile stocks flirted with flat-line and fell in the final thirty minutes of trading ahead of the widely anticipated consumer price inflation report on Thursday. 

In choppy trading, major averages wavered after wholesale inflation in September increased 0.4% on a monthly basis, the first increase in three months. 

The S&P 500 and the Nasdaq Composite indexes fell to new 2022 lows and investors digested the Federal Reserve's September minutes of meeting. 

The policy makers generally sounded hawkish but one comment offered a glimmer of hope that the Fed may slow or pause rate hikes if additional tightening leads to " significant adverse effects on the economic outlook."

The S&P 500 index fell 0.3% or 11.81 to 3,577.03 and the Nasdaq Composite decreased 0.08% or 9.09 to 10,417.10.  

Crude oil declined $2.34 to $87.01 a barrel and natural gas fell 14 cents to $6.44 a thermal unit. 

The yield on 2-year Treasury notes edged down to 4.29%, 10-year Treasury notes decreased to 3.89% and 30-year bonds eased to 3.88%. 

 

Wholesale Inflation Stays Elevated 

The producer price index increased 0.4% in September from the previous month and rose 8.5% from a year ago, the Bureau of Labor Statistics reported Wednesday. 

The wholesale inflation on an annual basis fell to 8.5% from 8.7% in August. 

Much of the inflation in the month was driven by 0.4% rise in service costs and travel and accommodation services jumped 6.4%. 

Cost of goods rose 0.4% driven by a 15.7% jump in the index for fresh and dry vegetables. 

The wholesale inflation, excluding food, energy and trade services increased 0.4% from August and jumped 5.6% from a year ago. 

The elevated producer price is likely to provide another reason for the Fed to continue its large-sized rate hike at its next meeting scheduled in three weeks. 

Closely watched consumer price index is scheduled to be released on Thursday. 

The Federal Reserve has raised rates five times in the last six months yet there is no progress on inflation. 

The Fed is widely expected to lift rates by 75 basis points at the next policy meeting ending on November 2. 

 

Stock Movers

PepsiCo, Inc gained 3.8% to $169.0 after the snack and beverage maker reported revenue in the third quarter increased 8% to $21.97 billion and net income rose 22% to $2.7 billion. 

The better-than-expected increase in sales was driven mostly by price increase in snacks business of as much as 20% and 2% decline in volume and flat volumes in its beverage unit and about 4% rise in prices.

El Pollo Loco, Inc increased 14.2% to $10.38 after the company announced a special dividend of $1.50 a share and stock repurchase program of $20 million. 

The special dividend is payable on November 9, 2022 to shareholders of record at the close of business on October 24, 2022.

Diamondback Energy Inc increased 1.4% to $141.35 after the company agreed to acquire FireBird Energy for $1.6 billion in cash and stock. 

The company said it has agreed to purchase all leasehold interest in 75,000 contiguous acres and related assets of FireBird in exchange for 5.86 million shares of its common stock and $775 million cash.

Knowbe4 Inc increased 12.6% to $24.32 on the report that the company is close to finalizing a deal with Vista Equity to go private for $4.5 billion. 

The news was first reported by the Wall Street Journal. 

 

European Markets Extend Losses to 6th Day 

European markets traded lower as investors reacted to mixed economic data in the region and corporate news. 

Industrial output across the euro zone increased 1.5% in August from July, Eurostat reported Wednesday. 

Output of factories, mines and utilities jumped 2.5% from a year ago. 

A separate report showed the UK's GDP unexpectedly declined in August on weak services and industrial output.  

GDP shrank 0.3% in August on a monthly basis after rising revised 0.1% in July. On a yearly basis, GDP growth slowed to 2.0% after a revised 3.5% increase in July, the Office for National Statistics reported Wednesday.   

The DAX index fell 0.4% to 12,172.26, the CAC-40 index dropped 0.3% to 5,818.47 and the FTSE 100 index fell 0.9% to 6,826.15. 

The euro declined to 97.07 U.S. cents and the British pound edged down to $1.109. 

The Swiss franc traded down to 99.71 U.S. cents. 

Koninklijke Philips NV dropped 12.3% to