Wall Street ends lower as investors await US inflation data

US stock market: U.S. stocks closed lower on Wednesday, the day after a report showed Americans borrowed more than ever on their credit cards in the last quarter, and a day ahead of U.S. Consumer Price Index (CPI) inflation data that could influence Federal Reserve interest rate decisions. “The markets today are just kind of waffling around. And the reason for that is tomorrow is going to be the CPI report for July being released”, said Jason Krupa, vice president of asset management at Lenox Advisors.

On Tuesday, the New York Federal Reserve Bank said U.S. credit cards debt surpassed $1 trillion, and Philadelphia Fed President Patrick Harker said the U.S. central bank may be at the stage where it can leave interest rates unchanged. “With price of oil going up, the consumer is the backbone of the economy. If they are too stretched and they stopped spending, that feeds us more into a recession narrative”, said Gina Bolvin, president of Bolvin Wealth Management Group in Boston.

Traders put the chance of no rate hike at the Fed's next policy meeting in September at 86.5 per cent, according to CME FedWatch Tool. Rate-sensitive megacap growth and technology stocks that have led the Wall Street rally, such as Nvidia (NVDA.O), Apple (AAPL.O) and Tesla (TSLA.O), were down between 0.8 per cent and 4.8 per cent. The CPI for July, due on Thursday, is expected to show a slight acceleration from last year. On a month-to-month basis, consumer prices are seen increasing 0.2 per cent, the same as in June.

China's consumer sector fell into deflation in July. The consumer price index (CPI) dropped in the world's second-largest economy, the National Bureau of Statistics said, its first decline since February 2021. The Dow Jones Industrial Average (.DJI) fell 191.13 points, or 0.54 per cent, to 35,123.36, the S&P 500 (.SPX) lost 31.67 points, or 0.70 per cent, to 4,467.71 and the Nasdaq Composite (.IXIC) dropped 165.93 points, or 1.2 per cent, to 13,718.40.

The losses followed a broad selloff on Tuesday, after credit rating agency Moody's downgraded several small and mid-sized banks. On Wednesday, big banks extended those losses with Bank of America (BAC.N) down 0.8 per cent and Wells Fargo (WFC.N) down 1.3 per cent. Four of the top 11 S&P 500 sectors rose, with energy stocks (.SPNY) leading the gain by a 1.22 per cent jump, touching a near six-month high, tracking a jump in crude oil prices.

Casino owner Penn Entertainment's (PENN.O) shares surged 9.1 per cent on a $2 billion deal with Walt Disney's ESPN (DIS.N) to launch a sports betting business. Walt Disney's shares dipped 0.7 per cent, erasing early gains ahead of its quarterly results due after the bell. Lyft (LYFT.O) shares tumbled 10 per cent despite a strong earnings forecast, as the company signaled it would double down on competitive pricing to catch up with rival Uber (UBER.N).

Of the 443 S&P 500 companies that have reported results as of Tuesday, 78.6 per cent beat analyst expectations, according to Refinitiv data. “It could be a little bit of that (the market is ) digesting the fact that we're beating expectations (on earnings) but those expectations have been coming down quarter over quarter”, said Krupa.

Volume on U.S. exchanges was 11.06 billion shares, compared with the 10.89 billion average for the full session over the last 20 trading days. Declining issues outnumbered advancing ones on the NYSE by a 1.18-to-1 ratio; on Nasdaq, a 1.63-to-1 ratio favored decliners. The S&P 500 posted 16 new 52-week highs and 7 new lows; the Nasdaq Composite recorded 60 new highs and 178 new lows.