NEW YORK (AP) — Most U.S. stocks are slipping Wednesday as traders pare their expectations for how big a move the Federal Reserve will make when it begins cutting interest rates next week.
The S&P 500 was 0.4% lower in early trading, and nearly nine in 10 of the stocks in the index were falling. The Dow Jones Industrial Average was down 381 points, or 0.9%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.1% higher.
Stocks fell as yields rose in the bond market after the government gave an update on prices at the consumer level that was pretty much in line with expectations. Overall inflation slowed to 2.5% in August from 2.9% in July, which was a touch better than expected. But prices rose more from July into August than expected when ignoring gasoline and energy, which economists say can be a better predictor of where inflation is heading.
All together, the data seemed to confirm that the Fed will indeed cut its main interest rate at its meeting next week, which would be the first such cut in more than four years. But it bolstered expectations that the Fed will begin with a traditional-sized move of a quarter of a percentage point rather than the more severe half-point that some had been expecting.
The Fed has already indicated it’s about to begin lowering interest rates as it shifts its focus from fighting high inflation to protecting the job market and keeping the economy out of a recession. With inflation down from its peak of 9.1% two summers ago, the Fed is hoping to ease the brakes off the already slowing economy by making it easier for companies and households to borrow.
The worry on Wall Street is that the cuts may prove to be too late, with many U.S. shoppers already struggling under the weight of still-high prices and stretched ability to spend more.
Vera Bradley’s dropped 6.5% after the designer of handbags and the parent company of the Pura Vida brand reported weaker profit and revenue for the latest quarter than analysts expected. It pointed to “stubbornly persistent macro consumer headwinds.”
Elsewhere on Wall Street, Trump Media & Technology Group dropped 17.3% to worsen its rough run since March. The company behind former President Donald Trump’s Truth Social platform has often risen and fallen with expectations for Trump’s re-election chances, and he’s coming off a debate with Vice President Kamala Harris.
Since closing above $66 in early March, the stock has tumbled to $15.41. That affects Trump particularly because he is the company’s largest shareholder.
Bitcoin and other cryptocurrencies — which Trump has been championing in recent weeks, along with his own crypto company — fell modestly Wednesday. Bitcoin was down roughly 2%.
In the bond market, the yield on the 10-year Treasury rose to 3.65% from 3.64% late Tuesday. The two-year yield, which more closely follows expectations for Fed action, rose even more. It climbed to 3.64% from 3.59%.
In stock markets abroad, indexes were modestly higher in Europe after weakening in much of Asia. Japan’s Nikkei 225 dropped 1.5% after a Japanese central bank official was quoted by Japanese media as indicating the Bank of Japan was getting ready to raise interest rates. The comments also pushed the value of the Japanese yen higher against the U.S. dollar, a move that earlier in the summer sent big ripple effects cascading through global markets.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
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