U.S. Stocks Retreat On Downbeat Inflation Report

Shares in the U.S. pulled back on Tuesday, rattled by uninspiring inflation report and a lack of growth in corporate earnings. The three major U.S. indexes retreated after days of record close.

Story continues below

The Labor Department reported Tuesday that consumer-price index was largely unchanged in July from the same period last year. Though prices of medical care and shelter rose, they were offset by falling prices of gasoline and grocery items.

With that, consumer prices only rose 0.8% YoY in July, indicating a slowdown in inflation from 1.4% increase in prices in January. The mild inflation growth seemed to provide a case for the Federal Reserve to go slow with its interest rate review.

“The latest weakness should seal the case against a September rate hike,” said economist Michael Feroli of J.P. Morgan Chase.

The dollar weakened on the downbeat consumer prices report and stocks sensitive to interest rates dipped.

How the major indexes performed

The Dow Jones Industrial Average (INDEXDJX:.DJI) eased 0.5% to 18552.02, while the S&P 500 (INDEXSP:.INX) declined 0.5% to 2178.15. The NASDAQ Composite (INDEXNASDAQ:.IXIC) lost 0.7% to 5227.11.

AT&T Inc. (NYSE:T), one of the companies sensitive to interest rates, fell 2.5% after the soft inflation data seemed to push back expectations of a rate hike by the Fed before the end of this year.

Oil fails to provide support

Rising crude oil and iPath S&P GSCI Crude Oil Total Return (NYSEARCA:OIL) prices wasn’t enough to provide for U.S. stocks after the Department of Labor released the disappointing consumer-price data. Nevertheless, energy was the greatest gainer on the S&P 500.

The price of U.S. oil increased 1.8% to $46.58 a barrel, hitting the highest mark last seen more than a month ago.

Oil prices have rallied in the recent sessions after it was reported that even OPEC members are now feeling the pressure of the subdued oil prices in their economies. As such, the major producing countries are planning to meeting either in September or October at which they are likely to agree to cap their production. Saudi Arabia, which in June declined to support a call to freeze output unless rival Iran was doing the same, now appears open to a production cut to stabilize the price of oil.

An ad to help with our costs