US stocks were lower on Thursday after the latest consumer inflation print came in hotter than anticipated, further blurring the picture of the Federal Reserve’s next interest rate decision in November.
The Dow Jones Industrial Average (^DJI) dropped around 0.1%, or just less than 60 points, while the S&P 500 (^GSPC) fell 0.2% after both clinched fresh record highs on Wednesday. The tech-heavy Nasdaq Composite (^IXIC) was off less than 0.1%.
Chip heavyweight Nvidia (NVDA) climbed more than 1% as it eyed a rise to a record high, while e-commerce giant Amazon (AMZN) also rose roughly 1%, helping the Nasdaq pare earlier losses.
In focus on Thursday was a reading on consumer inflation showing prices rose 0.2% last month, more than the 0.1% rise Wall Street was expecting. On an annualized basis, prices rose 2.4%, compared with 2.3% expected. The data was of greater interest than usual as investors puzzle over the chances of a “no landing” for the economy after last week’s jobs report revived worries about inflation flaring up again.
But the jobs market provided a surprise of its own on Thursday, as initial unemployment claims rose to 258,000, much more than Wall Street anticipated and the highest print since August 2023.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
Amid all the moving parts, traders now see a 17% chance that the Fed will hold rates steady in November, per the CME FedWatch Tool. Just a week ago, the odds of no cut were at 0% as the market heeded policymakers’ message and prepared for a 25 basis point rate reduction.
Also on deck is Tesla’s (TSLA) highly anticipated robotaxi event on Thursday evening. CEO Elon Musk is expected to reveal a two-door, butterfly-wing prototype of the cybercab he has bet the EV maker’s future on.
LIVE COVERAGE IS OVER15 updates
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10-year Treasury hits 4.1% for first time since July
The 10-year Treasury (^TNX) added as much as 4 basis points on Thursday to hit 4.1% for the first time since late July.
The 10-year has now added roughly 30 basis points over the past week as investors have scaled back their expectations for interest rate cuts amid signs that inflation may be stickier than initially thought while economic growth data holds steady.
For much of the past few years, higher yields have been a headwind for stocks. But Piper Sandler chief investment strategist Michael Kantrowitz told Yahoo Finance on Thursday yields likely have risen enough to be too much of a headwind just yet.
“I don’t think this backup in interest rates is all that worrisome for equities in aggregate,” Kantrowitz said. “But where it does show up is in leadership.”
Kantrowitz pointed out that areas like Real Estate (XLRE) and the small-cap Russell 2000 Index (^RUT), which had benefited from investors anticipating lower rates, have lagged amid the 10-year yields recent rise.
For now, Kantrowitz added, rising rates are driving market leadership more than it is weighing on the overall S&P 500 index.
“If rates keep going higher, I don’t think it’s a massive issue for equities unless it persists for, I’d say, a few months,” he said.
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Jobless claims to remain ‘elevated’ amid hurricanes, strikes
Weekly jobless claims soared to 258,000 in the week ending Oct. 5, the largest weekly gain since August 2023.
The move higher from the prior week’s reading of 225,000 was the largest week-over-week increase since July 2021. Economists were quick to point out that the ongoing strike from Boeing workers and the several hurricanes that hit different parts of the US over the past several weeks likely impacted the results.
“Claims rose markedly in some of the states most impacted by Hurricane Helene and the Boeing strike although some unimpacted states saw large increases as well,” Oxford Economics lead US economist Nancy Vanden Houten wrote in a note to clients on Friday. “Claims will likely continue to be elevated in states affected by Helene, Hurricane Milton and the Boeing strike until its resolved.”
Even with some clear distortion from Hurricane Helene, Citi economist Gisela Hoxha wrote in a note to clients that states that weren’t impacted by the hurricane also saw an increase.
“This suggests that the rise in initial claims is not just a temporary weather driven increase but could reflect some genuine economic weakness in other parts of the country,” Hoxha wrote.
On the surface, this would likely boost the case for a November interest rate cut from the Federal Reserve, which has made it clear it won’t welcome further signs of labor market weakness. But Thursday also brought a hotter-than-expected inflation reading, which furthered the case for the Fed not to cut at all in November.
Combine both pieces of data and the picture is rather mixed. There is perhaps one clear takeaway, though: Higher claims are likely going to be the norm heading into the Fed’s next meeting. This means market participants will continue to debate whether the central bank will be willing to write off the increase as noise from weather-related job displacements or consider it a true sign of labor market deterioration.
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What to know ahead of Tesla’s Robotaxi event
Tesla stock (TSLA) was nearly flat on Thursday as investors anxiously await the electric vehicle maker’s “We, Robot” event, set to take place well after the closing bell on Wall Street.
Yahoo Finance’s Pras Subramanian reports:
While most don’t expect a fully functional robotaxi that can be deployed right away, it’s what CEO Elon Musk and Tesla can do to paint a picture of autonomous self-driving that the company envisions for the next five or 10 years down the road that matters. Possible leaks have already surfaced suggesting Tesla may strike a robo-delivery deal with DoorDash, for instance. (Yahoo Finance could not verify those reports.)
Adam Jonas of Morgan Stanley, who named Tesla his “top pick” in the autos space, has nonetheless advised clients to “keep expectations well managed” for the event.
What will most likely be on display is a demonstration of the latest iteration of FSD (full self-driving) software and a demonstration of a fully autonomous “cybercab” in a closed or semi-closed course, Jonas wrote last month. But in a more recent note last week, Jonas said investors may hear more about how those cybercabs, or robotaxis, will be deployed.
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Social Security benefits will increase 2.5% in 2025
Yahoo Finance’s Columnist Kerry Hannon writes:
The increase in Social Security benefits next year will be pocket-sized.
The Social Security administration announced a 2.5% cost-of-living adjustment (COLA) for 2025. That’s down from 3.2% this year but in line with the 2.6% average over the past two decades.
Starting in January, the increase will add a little under $50 to the average monthly benefit of roughly $1,900, according to the SSA, providing some comfort to the more than 72 million retired senior citizens and disabled workers who have grappled with higher prices in recent years.
Read more here.
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Fed’s Bostic ‘comfortable’ with skipping an interest rate cut at an upcoming meeting: WSJ
Atlanta Fed president Raphael Bostic told the Wall Street Journal in an interview he’d be “comfortable with skipping a meeting if the data suggests that’s appropriate.”
Additionally, Bostic told the Journal’s Nick Timiraos that he only penciled in one additional interest rate cut for 2024 in his most recent submission to the Summary of Economic Projections.
“So that already signals that I’m open to not moving at one of the last two meetings if the data comes in as I expect,” Bostic said.
Bostic’s commentary comes after a hotter-than-expected September jobs report and a reading on inflation for September, which showed price increases not cooling as fast as hoped, have fueled investor bets that the Fed may not reduce interest rates further at its November meeting.
Traders now see a 15% chance that the Fed will hold rates steady in November, per the CME FedWatch Tool. Just a week ago, the odds of no cut were at 0%.
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Mortgage rates spike in biggest 1-week jump since April
Yahoo Finance’s Claire Boston reports:
Mortgage rates rose sharply last week, a new challenge for beleaguered house hunters and potential refinancing candidates.
The average rate on a 30-year fixed-rate loan jumped to 6.32% for the week through Wednesday, according to Freddie Mac, up from 6.12% a week earlier. It’s the biggest week-over-week increase since April.
Read more here.
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WeightWatchers continues furious rally on new GLP-1 offering
WW International (WW), better known as WeightWatchers, surged more than 15% Thursday. The stock has gone on a furious rally this week following the company’s announcement that it will offer a copycat of weight-loss drugs like those from Novo Nordisk (NVO).
WeightWatchers shares were up 38% Wednesday, and the stock is up nearly 160% from last week but remains far from record highs around $100 in 2018. The company has struggled amid heightened competition in the weight loss space, an unsuccessful rebrand, and disruptions related to COVID-19.
US laws permit companies to sell compounded versions of drugs on the Food and Drug Administration’s shortage list. The federal agency recently removed tirzepatide from the list, which is the active ingredient in Eli Lilly’s (LLY) GLP-1 drugs Zepbound and Mounjaro.
WeightWatchers will sell a compounded version of semaglutide, the active ingredient in Novo Nordisk’s Ozempic and Wegovy.
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Oil gains 2% on worries Israel-Iran conflict will impact supply
Oil gained as much as 2% on Thursday as traders assessed whether ongoing tensions between Israel and Iran will result in a supply disruption.
West Texas Intermediate (CL=F) traded above $74 per barrel, while Brent (BZ=F), the international benchmark price, jumped more than 2% to hover around $78 per barrel.
“Crude [is] continuing to find equilibrium value lifting prices today as uncertainty remains over when and where Israel will strike into Hezbollah and Iran,” Dennis Kissler, senior vice president of trading for BOK Financial Securities, said in a note on Thursday.
Hurricane Milton’s Florida landfall also kept the markets on edge. Production and refinery activity was not expected to be disrupted. However, analysts anticipated an interruption of distribution around the impacted areas as gas stations ran low on supplies.
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CPI bolsters hawkish view that Fed rate cuts need to be gradual
Yahoo Finance’s Jennifer Schonberger reports:
A warmer-than-expected inflation reading released Thursday offers new ammunition for Federal Reserve hawks who are arguing for a gradual pace of interest rate cuts.
This report, according to some Fed watchers, is unlikely to change the path outlined by policymakers for smaller future cuts following an initial 50 basis point reduction in September.
Investors, in fact, boosted the odds that the Fed will trim its policy rate by 25 basis points in November to 87% following the CPI release.
Read more here.
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Housing inflation eased in September in ‘sharp reversal’ from previous month
Yahoo Finance’s Hamza Shaban reports:
September’s Consumer Price Index (CPI) report came in hotter than analysts expected, but the data offered one major point of optimism: Shelter cost increases came down during the month, flashing an encouraging economic signal that the most stubborn contributor to inflation may finally be giving ground.
“The sharp reversal in shelter inflation allays fears that it could reaccelerate after the jump in August and brings the trend back toward the gradual disinflation that we continue to expect,” said Parker Ross, global chief economist at Arch Capital Group
Read more here.
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Gas prices and energy index plummet, but not enough to offset hot CPI
Falling gasoline prices were not enough to offset higher food and shelter prices in September, contributing to a hotter-than-expected inflation print.
The gasoline index decreased 4.1% last month, compared to a decline of 0.6% in the prior month, according to Bureau of Labor Statistics data released Thursday.
On an annualized basis, gasoline prices dropped 15.3%, while the energy index as a whole decreased 6.8%.
Read more here.
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Tech stocks decline after September consumer prices rose more than expected
The major averages opened lower on Thursday after the monthly Consumer Price Index (CPI) came in hotter than expected, setting the expectation that the Federal Reserve will opt for a smaller rate cut at its meeting next month.
The Dow Jones Industrial Average futures (^DJI) fell nearly 0.2%, while the S&P 500 (^GSPC) shed roughly 0.3%. Both slipped from their fresh record-high closes. The tech-heavy Nasdaq Composite (^IXIC) also dropped 0.5%.
Technology (XLK) stocks led the declines, followed by Consumer Discretionary (XLY). On the flip side, Energy (XLE) stocks rose as oil jumped Thursday morning.
Investors may be anticipating the Federal Reserve’s next interest rate cut will be 25 basis points rather than 50 after inflation rose by 0.2% in September, more than the 0.1% rise Wall Street was expecting, according to the latest government data.
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Delta stock falls after earnings miss, CEO blames CrowdStrike
Delta Air Lines (DAL) reported third quarter earnings that missed Wall Street’s expectations Thursday morning, Yahoo Finance’s Brad Smith reports. The miss sent its stock down as much as 7% in premarket trading before paring losses.
Here’s a look at its performance compared to analyst estimates compiled by Bloomberg.
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Adjusted net income: $971 million vs. $981 million expected
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Adjusted earnings per share: $1.50 vs. $1.52 expected
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Revenue: $14.59 billion vs. $14.68 billion expected
Delta said it forecasts earnings per share of $1.60 to $1.85 for the fourth quarter, with its $1.73 midpoint slightly below the $1.78 Wall Street analysts had expected, according to Bloomberg data.
Delta CEO Ed Bastian blamed disruptions caused by a widespread CrowdStrike outage in mid-July. Issues with CrowdStrike’s cybersecurity software, used by Delta, forced the airline to cancel thousands of flights and wiped $380 million from its revenue for the quarter, he said.
“We had 86 great days and we had five days that were impacted, caused by CrowdStrike,” Bastian told Yahoo Finance.
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Jobless claims unexpectedly surge to highest since August 2023
Weekly jobless claims rose more than expected last week in the latest sign that, while the labor market has shown some strength, there is still cooling in the jobs market.
New data from the Department of Labor showed 258,000 initial jobless claims were filed in the week ending Oct. 5, up from 225,000 the week prior and above the 230,000 economists had expected. This marked the highest weekly unemployment claims since August 2023.
Meanwhile, the number of continuing applications for unemployment benefits hit 1.86 million, up by 42,000 from the week prior.
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Prices rise more than expected in September
A closely watched report on US inflation showed consumer prices rose more than expected in September, according to the latest data from the Bureau of Labor Statistics released Thursday morning.
The Consumer Price Index (CPI) increased 2.4% over the prior year in September, an acceleration compared to August’s 2.5% annual gain in prices. The yearly increase was higher than the 2.3% economists had expected.
The index rose 0.2% over the previous month, above Wall Street’s expectation for a 0.1% increase.
On a “core” basis, which strips out the more volatile costs of food and gas, prices in September climbed 0.3% over the prior month and 2.4% over last year. Core prices rose 0.3% month over month and 3.2% on an annual basis in August. Both the monthly and yearly core readings were hotter than economists had projected.
