Traders on the floor of the New York Stock Exchange.
Those moves precede a much-anticipated U.S. inflation report, with July’s reading of the consumer price index slated for release Thursday.
Investors have kept an eye on the index in recent months for potential insights into how the Federal Reserve will move interest rates going forward. Economists polled by Dow Jones expect the inflation gauge rose 3.3% in July.
“Markets are focused on whether or not inflation is falling fast enough to allow the Fed to stop hiking rates,” said Bill Merz, head of capital markets research at U.S. Bank Wealth Management. “It’s been decelerating, but it’s still too high. And the Fed is at a bit of a crossroads.”
Wednesday’s moves follow a losing day on Wall Street, after a Moody’s downgrade of several regional banks dampened investor sentiment. Some market participants were concerned the signal could spell more trouble for markets ahead, but others said the pullback is expected given the extraordinary rally in equities this year.
The Nasdaq Composite has lost 4.4% since August began, while the S&P 500 and Dow have slid 2.6% and 1.2%, respectively. With Wednesday’s retreat, the Nasdaq has moved into negative territory on the quarter. Still, all three indexes are notably higher than where each began 2023.
“The markets had run up a lot,” said Phillip Colmar, managing partner at MRB Partners. “It’s a bit of a wait-and-see, digestion phase.”
Entertainment giant Disney and casino operator Wynn Resorts are slated to post quarterly results after the close. More than 90% of S&P 500 stocks have reported earnings as of Wednesday, and about four-fifths of those who have posted results have exceeded Wall Street’s expectations, according to FactSet.