NEW YORK MARKET CLOSE: Wall Street recovers from steep losses

(Alliance News) - Stocks in New York ended in the green on Wednesday, bouncing back after a sharp sell off the previous day as US inflation topped expectations.

"After the steep drop comes the rebound, which some might say falls into the 'dead cat bounce' category... the market is fighting to rebound, but the spectre of more and bigger Fed rate hikes looms large once again. This is still very much a tentative recovery, with investors edging back in. There will be a lot of burnt fingers after yesterday's slump," said Chris Beauchamp at IG.

The Dow Jones Industrial Average closed up 30.12 points, or 0.1%, at 31,135.09. The S&P 500 closed up 13.32 points, or 0.3%, at 3,946.01. The Nasdaq Composite closed up 86.10 points, or 0.7%, at 11,719.68.

US consumer price growth was faster-than-expected last month, data on Tuesday showed.

The annual inflation rate for August was 8.3%, topping expectations, according to FXStreet, of 8.1%, but still easing off July's rate of 8.5%.

Likely to worry the US Federal Reserve, however, was August's core inflation rate, which excludes energy and food. It ticked up to 6.3% on an annual basis from 5.9% in July. The rate had been expected to pick up more modestly to 6.1%.

"That's led to real worries that inflation is becoming embedded in the US economy and realisation is dawning that the Fed's job is not done and more aggressive tightening is ahead, with the foot firmly on the monetary brake pedal," Hargreaves Lansdown's Susannah Streeter explained.

The Fed will unveil its latest interest rate decision on Wednesday next week.

European stocks closed in the red as markets continued to digest the outlook for US inflation and mulled the UK's latest inflation print.

In Europe, the FTSE 100 in London closed down 1.5%, while the DAX 40 in Frankfurt closed down 1.2% and the CAC 40 in Paris down 0.4%.

The annual UK inflation rate, in a surprise, eased back into single-digits in August, the Office for National Statistics said.

The consumer price index rose 9.9% year-on-year in August, unexpectedly slowing from 10.1% in July. Consensus, according to FXStreet, was for the rate reading to tick up to 10.2%.

July's figure had been the highest since current records began in 1997 and at a level, according to models, not seen since 1982.

Inflation remains far higher than the Bank of England's 2% target, however.

The Bank of England reveal its interest rate decision next Thursday.

"The [UK] data won't in all likelihood change the outcome of the [Bank of England] meeting next week, with 75 basis points now heavily backed but 50 also possible," said Craig Erlam, senior market analyst at Oanda.

On Wall Street, Google-owner Alphabet lost an appeal against a EUR4.13 billion antitrust fine from the European Union.

The EU's second-highest court overwhelmingly upheld the EU's record fine against Google over its Android operating system for mobile phones.

In a statement, the EU's General court said it "largely confirms the commission's decision that Google imposed unlawful restrictions on manufacturers of Android mobile devices" in order to benefit its search engine.

This followed further fines for Alphabet in South Korea for privacy violations, also on Wednesday.

South Korea fined Alphabet and Meta Platforms more than USD71 million collectively for gathering users' personal information without consent for tailored ads.

Investigations into the two US tech giants found they had been "collecting and analysing" data on their users, and monitoring their use of websites and applications, the Personal Information Protection Commission said.

It was the country's highest-ever data protection fines.

Shares in Meta closed down 1.1%, while Alphabet shares finished 0.7% higher.

Starbucks rose 5.5% after it unveiled its new "financial roadmap" targeting double-digit revenue growth over the next three years.

From financial 2023 to 2025, Starbucks expects comparable store sales growth between 7% and 9%, annually - which is up from 4% to 5% previously.

Starbucks also expects global revenue growth in the range of 10% to 12% annually from financial 2023 to 2025 - which is an improvement from the company's previous range of 8% to 10%.

The coffee chain said this will be "driven by priority investments that elevate partner engagement and store efficiency, industry-leading digital programs, an engaged and growing Starbucks Rewards membership base, game-changing product innovation, and a rapidly expanding global footprint."

On top of the sales growth, Starbucks also announced it plans, between dividends and share buybacks, to return about USD20 billion to its shareholders in the next three years.

Johnson & Johnson was up 2.1%. The New Jersey-based drug maker announced a repurchase programme to buy up to USD5 billion in shares.

"The last few years have demonstrated the resilience of Johnson & Johnson. With continued confidence in our business and pipeline, the board of directors and management team believe that company shares are an attractive investment opportunity," Chief Executive Joaquin Duato said.

Brent oil was quoted at USD93.95 a barrel at the close on Wednesday, up slightly from USD93.31 a barrel late Tuesday. West Texas Intermediate was trading at USD88.45 a barrel, up against USD87.48.

The pound was quoted at USD1.1536 at the close Wednesday, up from USD1.1500 late Tuesday. The euro was priced at 0.9975 from USD0.9977.

Versus the yen, the dollar was trading at JPY143.13, down against JPY144.44 at the New York equities close on Tuesday.

Gold stood at USD1,695.76 an ounce late Wednesday, down sharply against USD1,701.48 at the close Tuesday.

"The hawkish Fed expectations boost the dollar and the US yields and weigh on gold appetite. Dovish Fed expectations, on the other hand, boost the risk appetite, and drive capital to riskier, and better yielding assets – like equities, leaving gold behind. So, the risks in gold remain tilted to the downside," explained Ipek Ozkardeskaya, senior analyst at Swissquote.

In Tokyo on Wednesday, the Nikkei 225 closed down 2.8%. In China, the Shanghai Composite ended 0.8% lower, while the Hang Seng in Hong Kong closed down 2.5%.

Industrial production growth in Japan was unable to match market expectations for July, data from the Ministry of Economy, Trade & Industry showed Wednesday.

Industrial production increased 0.8% in July from June, which is slower than the 1.0% growth expected from the market - according to consensus from FXStreet - and sharply lower than the 8.9% growth seen in June.

In the international economics calendar on Thursday, there are third quarter results from computer software company Adobe.

The international corporate calendar has US unemployment and retail sales data at 1330 BST. Before then, France will release its CPI print at 0745 BST.

By Heather Rydings; [email protected]

Copyright 2022 Alliance News Limited. All Rights Reserved.