Stock futures sink as inflation report comes in hotter than expected

U.S. stock futures fell Thursday after inflation data showed that consumer prices climbed more than expected.

S&P 500 (^GSPC) futures fell more than 2%, while futures on the Dow Jones Industrial Average (^DJI) ticked down 1.8%. The technology-heavy Nasdaq Composite (^IXIC) was down by 3%. The 10-year Treasury yield was back above 4%.

The Bureau of Labor Statistics released its Consumer Price Index (CPI) for September early Thursday, which showed prices rose 8.2% over the prior year and 0.4% over the prior month. Excluding food and energy, the core consumer price index, rose 6.6% from a year ago, marking the highest level since 1982.

Economists surveyed by Bloomberg had expected a slight deceleration to 8.1% annually, while the “core” reading, excluding food and energy, to accelerate to 6.5% from a year earlier.

The September report represents the second consecutive hotter-than-expected CPI print. Following the release of August’s CPI report, the S&P 500 dropped 4.3%, clocking in its worst day of the year. JPMorgan analysts warned in a note on Thursday that if September’s reading came in higher than the prior month’s 8.3%, the S&P 500 could drop as much as 5%.

In any case, investors continue to navigate a murky week marked by corporate earnings and inflation data. On Wednesday, the Producer Price Index (PPI), a measure of prices at the wholesale level, rose 0.4% in September after falling 0.2% during the prior month as inflation persisted.

“A hotter than expected print with smaller declines in energy and persistent increases in housing may make a hotter CPI more likely today,” Andrew Tyler, Head of U.S. Market Intelligence at JPMorgan, wrote in a note.

Also on Wednesday, investors mulled minutes from the Federal Reserve’s latest monetary-policy meeting, in which several Fed officials suggested the risk of doing too little to control price increases outweighed the risk of doing too much.

Wall Street was watching for any hint at when and how much the central bankers will slow their rate increases. But officials’ forecasts from September indicated restrictive monetary policy would stay in place until inflation meaningfully comes down.

“Therefore, while the FOMC may have a dovish faction, for now they are far out of the majority and are still only tentatively making a case to slow the pace of hikes,” analysts at Bespoke Investments wrote in a note to clients.

A trader works on the floor of the New York Stock Exchange NYSE in New York, the United States, Oct. 7, 2022. U.S. stocks fell sharply on Friday as a solid September jobs report fueled concerns that the Federal Reserve would continue to be aggressive with rate hikes.   The Dow Jones Industrial Average plunged 630.15 points, or 2.11 percent, to 29,296.79. The S&P 500 decreased 104.86 points, or 2.80 percent, to 3,639.66. The Nasdaq Composite Index shed 420.91 points, or 3.80 percent, to 10,652.40. (Photo by Michael Nagle/Xinhua via Getty Images)

A trader works on the floor of the New York Stock Exchange NYSE in New York, the United States, Oct. 7, 2022. (Photo by Michael Nagle/Xinhua via Getty Images)

Delta Air Lines (DAL) kicked off earnings before the open. Delta posted a quarterly profit miss by Wall Street estimates on Thursday, while the carrier forecasts travel demand to remain robust despite growing risks of an economic recession. Shares of the Atlanta-based airline were up 5% in pre-market trading.

BlackRock (BLK) also reported earnings, including a 16% drop in profit. Other financial heavyweights such as JPMorgan Chase (JPM) and Morgan Stanley (MS) are set to report on Friday.

“I still think household balance sheets are in decent shape,” JPMorgan Asset Management Global Market Strategist Jordan Jackson told Yahoo Finance Live on Wednesday. “I will acknowledge that we do anticipate another quarter of a buildup in loan loss provisions across banks. This would be the sixth consecutive quarter that banks have decided to build up those loan loss reserves. And that is certainly going to act as a drag on overall bank earnings.”

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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