Wall St slides as economic data stokes inflation worries, Apple drags

Wall Street stocks fell on Wednesday after stronger-than-expected services sector data fueled concerns of sticky inflation and interest rates staying higher for longer, while weakness in Apple Inc shares further weighed down the indexes.

The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing Purchasing Managers’ Index rose to 54.5 last month against expectations of 52.5, while a gauge of prices paid by service-sector businesses for inputs increased.

Traders’ bets that the Federal Reserve would pause hiking interest rates at its Sept. 20-21 meeting were 91 per cent, while bets on a pause in November slipped to 46.8 per cent from nearly 57 per cent before the data, the CME FedWatch Tool showed.

“The stronger-than-expected ISM services data shows that investors are still not very skilled at reading the post-pandemic tea leaves,” said Carol Schleif, chief investment officer at BMO’s family office in Minneapolis.

While investors have been hoping for interest rate cuts soon, Schleif said the data shows a strong economy and inflation that is not coming down “as fast as the Fed would need to start cutting rates any time in the foreseeable future.”

Earlier in the day Boston Fed President Susan Collins stressed the need for the central bank to “proceed carefully” with its next monetary policy steps.

The Dow Jones Industrial Average fell 235.55 points, or 0.68 per cent, to 34,406.42. The S&P 500 lost 40.09 points, or 0.89 per cent, at 4,456.74 and the Nasdaq Composite dropped 179.32 points, or 1.28 per cent, to 13,841.63.

Of the S&P 500’s 11 major industry sectors technology was the biggest decliner, down 1.6 per cent. Defensive utilities was the only gainer, up 0.1 per cent.

Apple was the biggest drag across the three major indexes, down 3.7 per cent after a report that China had banned officials at central government agencies from using iPhones and other foreign-branded devices for work.

Other megacaps also declined, with Tesla, Amazon.com and Nvidia down between 1.6 per cent and 3.8 per cent as yields on the 10-year and the two-year US Treasuries moved higher after the economic data.

The S&P 500 barely reacted after the Fed’s “Beige Book” snapshot of the US economy was released, a week ahead of the keenly awaited August inflation data and the Fed’s rate decision on Sept. 20.

The report showed “modest” US economic growth in recent weeks while job growth was “subdued,” and inflation slowed in most parts of the country.

A recent uptick in oil prices has also stoked fears of persistent inflationary pressures that could compel the Federal Reserve to maintain its hawkish stance on interest rates.

Lockheed Martin dropped 4.5 per cent after the US weapons maker trimmed the delivery outlook for its F-35 jets.

Roku climbed 1.9 per cent after the video-streaming company said it would reduce its workforce by about 10 per cent and limit new hiring.

Declining issues outnumbered advancers on the NYSE by a 2.38-to-1 ratio; on Nasdaq, a 2.10-to-1 ratio favored decliners.

The S&P 500 posted 3 new 52-week highs and 25 new lows; the Nasdaq Composite recorded 33 new highs and 146 new lows.

• Business