September inflation data clouds Fed outlook

September Clouds
September Clouds

The U.S. stock market slipped on Thursday as new data on inflation and unemployment claims clouded the outlook for future Federal Reserve interest rate cuts. The Dow Jones Industrial Average fell about 0.1%, or just under 60 points, while the S&P 500 dropped 0.2%. The tech-heavy Nasdaq Composite was down less than 0.1%.

A consumer inflation report showed prices rose 0.2% last month, above the 0.1% expected by Wall Street. On an annual basis, prices increased 2.4%, higher than the forecasted 2.3%. This data raised concerns about persistent inflation possibly influencing the Fed’s next rate move.

Adding to the uncertainty was a surprise jump in initial jobless claims to 258,000, well above expectations. Economists say recent hurricanes and strikes may have contributed to this increase.

Traders now see a 17% chance the Fed will keep rates steady in November, up from almost no chance just a week ago.

The 10-year Treasury yield hit 4.1% for the first time since July. This roughly 30 basis point rise in the past week reflects fading hopes for rate cuts amid sticky inflation and firm economic growth data.

September inflation muddles Fed rate path

“Rising yields are a challenge but not yet a broad market headwind, although they are impacting rate-sensitive sectors like real estate and small caps,” said Michael Kantrowitz, chief investment strategist at Piper Sandler. Weekly jobless claims jumped significantly, with economists citing the effects of Hurricanes Helene and Milton as well as the Boeing strike. Nancy Vanden Houten, lead U.S. economist at Oxford Economics, noted increased claims in states hit hard by these events.

Tesla drew attention ahead of its highly anticipated Robotaxi event. Investors do not expect an immediately deployable robotaxi but are interested in CEO Elon Musk’s vision for autonomous driving over the next 5-10 years. Social Security benefits will rise 2.5% in 2025, down from this year’s 3.2% adjustment but in line with the long-term average.

This means an extra $50 per month for the average recipient. Atlanta Fed president Raphael Bostic said he is open to skipping a rate cut if the data supports that decision. Mortgage rates posted their biggest one-week gain since April, with the average 30-year fixed loan rate rising to 6.32% from 6.12%, creating new hurdles for homebuyers and refinancers.

WeightWatchers International jumped over 15% Thursday after announcing plans to offer a generic version of popular weight-loss drugs. The stock surged 38% Wednesday and is up nearly 160% in the past week, though still below 2018 highs.

Maya Johnson

Maya is the editor-in-chief of KillerStartups.com. She provides value to early-stage entrepreneurs through content and her weekly newsletter. Reach her at [email protected]

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