Rising Inflation Expectations Weigh on Markets

Last Updated: Tuesday, November 29, 2022 4:35 PM | MT Newswires

US benchmark indices closed mostly lower on Tuesday as inflation expectations ticked up while consumer confidence dropped.

The Nasdaq Composite fell 0.6% to 10,983.80, while the S&P 500 lost 0.2% to 3,957.63. The Dow Jones Industrial Average was almost unchanged at 33,852.53. Technology, utilities, and consumer discretionary posted the steepest declines among sectors, while real estate led the gainers, followed by energy, and financials.

In economic news, consumer confidence continued to fall in November almost in line with expectations, as persistently high gasoline prices and ongoing inflation concerns haunted consumers into the holiday season, The Conference Board said. The organization's confidence index this month declined to 100.2 from October's downwardly revised reading of 102.2.

Average expected inflation over the next 12 months increased to 7.2% from 6.9% in October, with the median expected rate rising to 6.2% from 6.1%, Jefferies said in a note.

"The [Federal Reserve] isn't overly concerned about short-term inflation expectations, but this is going in the wrong direction, and the wide gap between the average and the median shows that there are still a good number of folks out there that are concerned that they are in for another year of price increases like those experienced in 2021 and 2022," Jefferies economists Thomas Simons and Aneta Markowska said.

US home prices continued to drop sequentially in September while annual gains slowed amid persistent macroeconomic headwinds, S&P Global (SPGI) division S&P Dow Jones Indices said. Nationally, the S&P CoreLogic Case-Shiller Index posted a month-over-month fall of 0.8% after seasonal adjustment, following a 0.9% decline the prior month.

The Federal Housing Finance Agency said US home prices in September edged 0.1% higher sequentially, following a 0.7% drop the previous month and compared with Wall Street expectations for a 1% decline.

The US 10-year yield increased 5 basis points to 3.75%.

In company news, the central Chinese city of Zhengzhou, home to Apple's (AAPL) biggest iPhone manufacturing plant, will reportedly return to relaxed COVID control measures starting Wednesday. Recent protests in Chinese cities against the country's strict COVID-19 measures and reports of protesting workers at Apple supplier Foxconn in Zhengzhou led Wedbush analysts on Monday to forecast "significant" iPhone production shortages heading into the holiday season. The iPhone maker's shares fell 2.1%, the worst performer on the Dow.

Pinduoduo (PDD) was amongst the top gainers on the Nasdaq, up 5.9%, after several brokerages raised their price objectives for the company's stock. Citigroup boosted its price target to $111 from $79, while maintaining its buy rating.

West Texas Intermediate crude oil futures gained 1.7% to $78.55.

Gold was up 0.4% to $1,762.70 per troy ounce, and silver rose 1.3% to $21.40 per ounce.

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