Stocks Decline Following a Host of Economic Data…..

U.S. stocks ended the day lower as the markets continued to digest hot inflation reports from earlier this week that caused a sharp selloff on Tuesday. The markets appeared to be pricing in a 75-basis-point rate hike as the most probable outcome for next week’s Fed meeting. A host of economic reports were released, with retail sales mostly missing estimates, though weekly initial jobless claims unexpectedly moderated. Meanwhile, industrial production unexpectedly declined, New York manufacturing activity improved but remained contractionary, and Philadelphia manufacturing unexpectedly fell into contraction territory. Additionally, import prices cooled by a smaller amount than expected, and business inventories rose in line with estimates. In equity news, U.S. railroad companies garnered attention after reaching a tentative deal to avert a strike, Humana raised its full-year guidance, and Adobe Incorporated announced an agreement to acquire Figma for about $20.0 billion, but offered softer-than-expected revenue guidance. Treasury yields were mostly higher, and the yield curve continued to flatten, while the U.S. dollar was little changed. Crude oil prices were lower, and gold also traded to the downside. Asian and European stocks finished mixed as the global markets remained cautious amid recent inflation reports that heightened inflationary concerns.

The Dow Jones Industrial Average declined 173 points (0.6%) to 30,962, the S&P 500 Index decreased 45 points (1.1%) to 3,901, and the Nasdaq Composite went down 167 points (1.4%) to 11,552. In moderate volume, 4.4 billion shares of NYSE-listed stocks were traded, and 4.7 billion shares changed hands on the Nasdaq. WTI crude oil fell $3.38 to $85.10 per barrel. Elsewhere, the gold spot price decreased $36.60 to $1,672.50 per ounce, and the Dollar Index rose 0.1% to 109.71.

Retail sales mostly misses, jobless claims improve, headlining a fully loaded economic docket…..

Advance retail sales for August rose 0.3% month-over-month (m/m), versus the Bloomberg consensus forecast of a 0.1% dip, and compared to July’s downwardly adjusted 0.4% decline. Last month’s sales ex-autos decreased 0.3% m/m, compared to expectations of a flat reading and as July’s figure was revised lower to an unchanged reading. Sales ex-autos and gas were up 0.3% m/m, below estimates of a 0.5% rise, and matching July’s downwardly adjusted gain. The control group, a figure used to calculate GDP, came in unchanged m/m, versus projections of a 0.5% gain, and following July’s unfavorably revised 0.4% rise.

Weekly initial jobless claims came in at a level of 213,000 for the week ended September 10, south of estimates of 227,000 and the prior week’s downwardly revised 218,000 level. The four-week moving average fell by 8,000 to 224,000, and continuing claims for the week ended September 3 ticked 2,000 higher to 1,403,000, below estimates of 1,478,000. The four-week moving average of continuing claims declined by 7,750 to 1,413,250.

The Federal Reserve’s report on industrial production showed a 0.2% m/m decrease in August, compared to estimates of a flat reading, and versus July’s downwardly revised 0.5% gain. Manufacturing output ticked 0.1% higher, mining output was little changed, and utilities consumption fell 2.3%. Capacity utilization declined to 80.0%, slightly below forecasts to match the prior month’s downwardly adjusted 80.2% rate. Capacity utilization was a 0.4 percentage point above its long-run average.

The Import Price Index fell by 1.0% m/m for August, versus estimates of a 1.3% drop, and compared to July’s negatively revised 1.5% decrease. Versus last year, prices were up by 7.8%, above forecasts of a 7.7% increase and below July’s downwardly revised 8.7% rise. Import prices excluding petroleum were down 0.2% m/m, versus estimates to decline 0.6%.

The Empire Manufacturing Index, a measure of activity in the New York region, showed the index improved more than expected but remained in contraction territory (a reading below zero) this month. The index rose to -2.5 from the -31.3 reading that was posted in August and compared to estimates of an improvement to a -12.9 level.

The Philly Fed Manufacturing Business Outlook Index unexpectedly fell into contraction territory (a reading below zero) for September. The index dropped to -9.9 versus estimates of a decrease to 2.3 from August’s 6.2 level.

Business inventories rose 0.6% m/m in July, matching forecasts, after June’s unrevised increase of 1.4%.

Treasury yields were mostly higher, as the yield on the 2-year note soared 10 basis points (bps) to 3.87%, and the yield on the 10-year note gained 4 bps to 3.45%, while the 30-year bond rate was unchanged at 3.48%.

The markets continued to grapple with how much the Fed will remain aggressive with its monetary policy as containing inflation remains top priority. The U.S. dollar has been volatile recently but remains near multi-year highs.

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