Stocks closed lower Wednesday following the latest update on inflation and the latest warning of a possible recession. The S&P 500 fell 16.99 points, or 0.4%, to 4,091.95 after bouncing between small gains and losses earlier. The Dow Jones Industrial Average fell 38.29 points, or 0.1%, to 33,646.50. The Nasdaq composite fell 102.54 points, or 0.9% to 11,929.34. Minutes from the Fed's last meeting revealed Wednesday that its staff economists have forecast that a pullback in lending resulting from the banking turmoil will cause a "mild recession" starting later this year, the AP reports.
A report Wednesday morning showed that prices at the consumer level were 5% higher last month than a year earlier. That’s still well above the Federal Reserve’s comfort level, and some underlying trends within the data were also concerning. That weighed down financial markets. But on the upside for investors, the overall inflation number was still better than the 5.2% that economists expected. It also marked a continued slowdown from inflation’s peak last summer. Traders are still largely betting the Fed will raise short-term interest rates by another quarter of a percentage point at its next meeting, according to data from CME Group.
American Airlines Group lost 9.2% after it gave a forecast for its first-quarter profit that fell short of some analysts' expectations. It said it expected to report stronger results than it had earlier forecast, but that still wasn't high enough to meet many analysts' estimates for earnings per share. It had the largest loss within the S&P 500 and helped drag down other airline stocks. United Airlines Holdings slid 6.5%, Southwest Airlines lost 1.4%, and Delta Air Lines shed 2.4%.
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Also weighing on Wall Street Wednesday was the fact that inflation remains high, even if it is slowing. And underneath the surface, inflation also remains sticky after ignoring food and energy costs. That’s something called "core inflation" and can offer a better picture of where trends are heading. That has some investors girding for the "higher for longer" interest rates that the Fed has long been warning about. "The Fed’s mandate of 2% inflation is a distant dream and interest rates have to remain somewhat restrictive till we see meaningful improvement in the trajectory of core inflation," says Gargi Chaudhuri, head of iShares Investment Strategy, Americas.
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