Stocks fell broadly Tuesday and dragged major indexes lower for the week as investors deal with another day of choppy trading.
The market had started higher after the latest data on inflation came in better than economists had expected, but reversed course within the first hour of trading.
The S&P 500 fell 0.6% as of 2:46 p.m. Eastern. The benchmark index’s 11 sectors were all in the red, with banks and industrial and communication companies weighing down the index the most.
The Dow Jones Industrial Average fell 317 points, or 0.9%, to 34,552 and the Nasdaq fell 0.5%. The Russell 2000 index of small companies was down 0.4%.
U.S. consumer prices rose a lower-than-expected 0.3% last month, the smallest increase in seven months and a hopeful sign that inflation pressures may be cooling. Investors initially reacted well to the data and stocks gained ground early on, but the gains quickly faded.
Bond yields eased following the Labor Department's report. The yield on the 10-year Treasury fell to 1.28% from 1.32% late Monday. It had been rising overnight to about 1.34% shortly before the report was released.
The lower bond yields weighed down banks, which rely on higher yields to charge more lucrative interest on loans. Bank of America fell 3% and JPMorgan was down 2.2%.
Inflation has been a key concern for investors, who are trying to gauge how it will impact both the economy's recovery and the Federal Reserve's policy on maintaining low interest rates. The central bank has said higher costs for raw materials and consumer goods will likely remain temporary as the economy recovers, but analysts are concerned that the higher prices could stick around and dent companies' bottom lines while also crimping spending.
“There are still inflationary pressures even if they [consumer prices] came in lower than expected," said Kristina Hooper, chief global market strategist at Invesco. “It doesn’t mean that it's over.”
The most recent report on inflation at the wholesale level was worse than expected, signaling problems for companies contending with higher costs, she said. Those costs could be passed along to consumers, but companies unable to do that could see their upcoming earnings get dented.
The broader concerns about inflation and rising prices have added to choppy trading, along with lingering worries about how the more contagious delta variant of COVID-19 will impact an economy that's still finding its footing.
“This environment is likely to continue,” Hooper said. “It may seem uncomfortable because we had such a strong market for so long.”
Still, she expects stocks to continue making gains after Wall Street gets past much of the uncertainty over the Fed and the economic recovery, “but it could be a very bumpy road between now and then.”
Investors will get more information on the economy later this week. The Commerce Department will release retail sales for August on Thursday, giving another glimpse into consumer spending. The University of Michigan will release its consumer sentiment survey on Friday.
Elsewhere in the market, several companies made big moves on a mix of news.
Dietary supplement company Herbalife slumped 21.2% after cutting its profit and revenue forecasts. Wynn Resorts slid 11% for the biggest drop in the S&P 500 over concerns that its casinos in Macau could face stricter oversight as China tries to tighten regulations on a broad range of industries.
Cable provider Comcast fell 6.2% after the company warned about a slowdown in new cable customers.
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