U.S. Stocks Mostly Lower As Consumer Price Growth Exceeds Estimates

With a highly anticipated report from the Labor Department showing a bigger than expected increase in U.S. consumer prices, stocks have moved mostly lower in morning trading on Wednesday. The major averages are extending the notable downward move seen over the two previous sessions.

Currently, the major averages are off their lows of the session but still in negative territory. The Dow is down 309.66 points or 1 percent at 30,671.67, the Nasdaq is down 49.66 points or 0.4 percent at 11,215.06 and the S&P 500 is down 28.63 points or 0.8 percent at 3,790.17.

The continued weakness on Wall Street comes as the Labor Department’s report on consumer price inflation has added to concerns about the outlook for interest rates.

The Labor Department said its consumer price index shot up by 1.3 percent in June after jumping by 1.0 percent in May. Economists had expected consumer prices to leap by 1.1 percent.

With the bigger than expected monthly surge, the annual rate of consumer price growth accelerated to 9.1 percent in June, reflecting the biggest increase since November 1981.

Economists had expected the annual rate of consumer price growth to accelerate to 8.8 percent in June from 8.6 percent in May.

Excluding increases in prices for food and energy, core consumer prices advanced by 0.7 percent in June after climbing by 0.6 percent in May. Core prices were expected to rise by another 0.6 percent.

While the annual rate of core consumer price growth slowed to 5.9 percent in June from 6.0 percent in May, the rate of growth was expected to decelerate to 5.7 percent.

The bigger than expected jump in consumer prices has solidified expectations the Federal Reserve will raise interest rates by 75 basis points later this month and increases the likelihood of another 75 basis point rate hike in September.

Traders continue to express concerns the Fed’s aggressive fight to contain elevated inflation will inadvertently push the economy into a recession.

Later in the day, the central bank is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts.

Airline stocks have moved sharply lower in morning trading, resulting in a 2.4 percent nosedive by the NYSE Arca Airline Index.

Delta Air Lines (DAL) has helped lead the sector lower, plummeting by 7.8 percent after reporting weaker than expected second quarter earnings.

Considerable weakness is also visible among banking stocks, as reflected by the 2.1 percent slump by the KBW Bank Index.

Chemical, tobacco and telecom stocks are also seeing notable weakness, while most of the other major sectors are showing more modest moves to the downside.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index rose by 0.5 percent, while China’s Shanghai Composite Index inched up by 0.1 percent.

Meanwhile, the major European markets have shown significant to the downside on the day. While the German DAX Index has plunged by 2 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are down by 1.3 percent and 1.2 percent, respectively.

In the bond market, treasuries have climbed well off their early lows but continue to see modest weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.3 basis points at 2.971 percent.