Wall Street Ends Lower Ahead of Inflation Data

Summary:

• U.S. stocks close lower ahead of Consumer Price Index report, prompting concerns about potential impact on Federal Reserve's interest rate decisions.
• Market sees declines, with Dow, S&P 500, and Nasdaq posting notable losses.
• July's Consumer Price Index report expected to reveal slight acceleration in annual inflation rate.
• Investor focus shifts to core CPI, excluding volatile food and energy prices, amid ongoing wage pressures.
• Disney's shares dip but recover in after-hours trading; company remains committed to significant cost reductions.
• Collaboration between Disney's ESPN and Penn Entertainment leads to surge in Penn shares.
• Lyft's shares drop despite positive earnings forecast; company emphasizes competitive pricing to rival Uber.

U.S. stocks closed lower on Wednesday ahead of key inflation data that could influence the Federal Reserve's decision on whether to keep raising interest rates. The Dow shed about half a percent, the S&P 500 lost seven-tenths of a percent, and the Nasdaq dropped nearly 1.2 percent.

Inflation Data and Market Movement

The Consumer Price Index report for July, due on Thursday, is expected to show a slight acceleration in the annual inflation rate. On a month-to-month basis, consumer prices are seen increasing 0.2 percent, the same as in June. However, it's the core CPI, which strips out volatile food and energy prices, that investors will be focused on, says Eric Lynch, managing director at Scharf Investments. Lynch highlights the persistent wage pressures on the economy's margins this year. UPS released a margin guidance downgrade of about 100 basis points due to the new Teamsters contract deal, indicating ongoing wage pressure. The core CPI is projected to remain elevated, possibly within a 4.5 percent range or even slightly higher.

Corporate Developments

Among individual stock movements, Disney's shares dipped at the close but rose over 1 percent in after-hours trading. The entertainment giant reaffirmed its commitment to investors by announcing its progress towards cutting costs by more than $5.5 billion, a pledge made in February. In a collaboration between Disney's ESPN network and casino owner Penn Entertainment, a new online betting venture caused Penn shares to surge by more than 9 percent. Conversely, Lyft experienced a 10 percent drop in shares, despite a positive earnings forecast. The company signaled its intent to intensify competitive pricing efforts in order to catch up with its rival, Uber.

As investors await the release of the Consumer Price Index report, market sentiment remains cautious, influenced by potential inflationary pressures. Various corporate moves, such as Disney's cost-cutting endeavors and Lyft's competitive pricing strategy, contribute to the complex dynamics at play in the stock market.