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Market Snapshot: Dow falls in final hour of trading as Wall Street struggles to recover from worst selloff in two years

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U.S. stock indexes traded slightly lower on Wednesday after shedding morning gains, as data showed that costs for wholesale goods and services fell for the second month in a row, though inflation remains endemic in the U.S. economy.

On Tuesday, stocks saw the worst daily losses since June 2020 as investors reeled from disappointing consumer price inflation data, but only gave back gains made in the previous four sessions and remain above the year-to-date lows seen in June.

How are stock indexes trading?

The Dow Jones Industrial Average
DJIA,
-0.22%

 lost 33 points, or 0.1%, to 31,069

The S&P 500 
SPX,
-0.06%

rose 2 points, or less than 0.1%, to 3,936

The Nasdaq Composite
COMP,
+0.17%

gained 35 points, or 0.3%, to 11,669

In a dramatic session on Tuesday, major indexes logged the biggest daily percentage falls since June 11, 2020. The Dow Jones Industrial Average tumbled 1,276.37 points, or 3.9%, to 31,104.97, the S&P 500 fell 177.72 points, or 4.3%, to 3,932.69 and the Nasdaq Composite slumped 632.84 points, or 5.2%, to close at 11,633.57.

What’s driving the markets?

Investors on Wednesday were struggling to find their footing after all three benchmark stock indexes suffered their worst day in more than two years.

August producer price inflation, or PPI, which measures the cost of wholesale goods and services, dropped 0.1% in August, the government said Wednesday, mostly due to lower gasoline prices. The decline was in line with forecast by economists polled by the Wall Street Journal. Still, core PPI, a separate measure of wholesale prices that excludes volatile food and energy costs, rose by 0.2% in August.

The increase in wholesale prices over the past year slowed to 8.7% from 9.8% in the prior month. The increase in these so-called core prices over the past year also slowed to 5.6% from 5.8%.

See: U.S. wholesale inflation falls for second month in a row due to cheaper gas

In a blow to investors who had been hoping for an easing in high inflation, Tuesday’s data showed the U.S. CPI rising 0.1% in August and the annual rate slowing to 8.3%, against expectations for a monthly fall of 0.1% and a year-over-year rate of 8%. The core inflation rate also climbed by more than expected.

“Those data appears to me that everybody got it wrong that they thought inflation peaked last month, or the month before last year,” said Todd Morgan, chairman and partner at Bel Air Investment Advisors. “I think you’re seeing people exit positions and frightened out of these positions.”

Investors dumped stocks on worries sticky inflation could force the Federal Reserve to keep its aggressive tightening of monetary policy for longer. Some have predicted the Federal Reserve could next week raise interest rates by as much as 1%.

“It’s not as much a ‘most would expect’ because it did materially alter rate hike expectations. We know that a 75 basis point rate hike in September is now fully expected — felt like it was written in pencil,” said David Wagner, portfolio manager at Aptus Capital Advisors. “There’s a rising chance of 100 basis points, but I’m more watching the fact that the market is now pricing in the greater chance of 75 basis points in November, which was opposed to the previous 50 basis points.”

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.414%

was down less than 1 basis point to 3.410%, while that of the 2-year note
TMUBMUSD02Y,
3.767%

was up 2.6 basis points to 3.771%.

“That Treasury yields continue to inch higher suggests that the market sees inflation continuing to work its way into the economy, as the lagged effect of rate hikes continues,” said Quincy Krosby, Chief Global Strategist, LPL Financial in Charlottesville, VA. “A potential rail strike is also a concern, as it would create yet another supply challenge as goods, including grains and vehicles, are halted from being delivered by rail.”

undefinedThe Dow Jones U.S. Railroads Index 
DGUSRAIA,
-2.93%

slumped 3%. Shares of CSX Corporation
CSX,
-1.68%

and Union Pacific
UNP,
-3.75%

down 1.7% and 4.1%, respectively. Major railroad operators have warned that they are preparing for a possible strike and halting some services.

See: Why a possible railroad strike would cripple the supply chain, stoke inflation

Tuesday’s Wall Street selloff spread to Asia, where the Nikkei 225 index
NIK,
-2.78%

led losses with a 2.8% drop. European stocks
SXXP,
-0.86%

were lower, with the Stoxx Europe 600 index 
SXXP,
-0.86%

 falling 0.8% to 417.80.

Companies in focus

Shares of Comcast Corp. 
CMCSA,
+2.85%

 bounced 3.4% Wednesday, off the previous session’s 2 1/2-year closing low, after the cable TV and internet provider boosted its share repurchase program to $20 billion.

Shares of Uniper SE
UN01,
-18.26%

tumbled 18.3% Wednesday, following a report that the German government is considering fully nationalizing the gas importer or increasing its stake to above 50%.

U.K. homeware brand Dunelm Group
DNLM,
+3.46%
’s
shares rose 3.5% after the company reported a 16% rise in annual sales as customers from all demographics sought out the retailer’s home equipment and furnishings despite surging inflation.

Twilio Inc.
TWLO,
+9.93%

shares rose 10.8% after the company said Wednesday that its board of directors has approved a restructuring plan that will see the company cut about 11% of its staff. 

— Barbara Kollmeyer contributed to this article

Hear from Ray Dalio at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The hedge-fund pioneer has strong views on where the economy is headed.

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