Investors took a hit on Wednesday as the S&P 500 dropped 1.11%, closing at 7,718.94. The market reacted to consumer inflation data for September that came in higher than expected. The Nasdaq Composite took a heavier blow, losing 1.88% to end at 26,692.87. Meanwhile, the Dow Jones Industrial Average managed to limit its losses to 48.62 points, or 0.09%, ending at 51,621.48, thanks to gains in healthcare stocks like UnitedHealth and Amgen.
September's inflation data revealed a 0.6% rise in the consumer price index (CPI) from August, which matched forecasts. But the year-over-year CPI climbed by 3.7%, topping the anticipated 3.6% rise. Core CPI, excluding food and energy, also exceeded expectations with a 0.3% monthly and 2.6% annual increase. All eyes are now on the Federal Reserve's December meeting. Market strategist Philip Blancato pointed out that next year’s core CPI might hit 3%, driven by rising oil prices.
Oil prices have been on an upward trajectory. West Texas Intermediate futures increased by 1.01%, closing at $95.09 per barrel. Gasoline prices have also surged, now averaging $4.33 per gallon, compared to $3.08 a year ago. Analysts don't believe easing restrictions on Russian diesel fuel exports will provide much relief.
The tech sector isn't faring well either. Concerns over debt levels, especially among companies outside the "Magnificent Seven, " have spooked investors. CoreWeave's shares dropped significantly, while Oracle's stock declined nearly 9%. Chipmakers like Micron Technology, Advanced Micro Devices, Sandisk, and Intel also saw losses ranging from 3% to 5%.
Banking stocks had their own troubles. Bank of America shares fell nearly 5% after missing third-quarter revenue expectations and facing over $1.2 billion in federal penalties for not reporting suspicious transactions. Morgan Stanley, despite surpassing quarterly expectations, saw its stock drop nearly 3%.
Berkshire Hathaway's Winning Streak
While the broader market slumped, Berkshire Hathaway's Class A shares are on a roll, heading for a 10-day winning streak, a feat not seen since January 2018. The stock hit an intraday high of $786,000 on Tuesday, buoyed by investor optimism about the company's future under new CEO Greg Abel. Since the streak began, the conglomerate has gained over 5%, effectively deploying its large cash reserves.
Meanwhile, U. S. consumers are enduring one of the longest periods of high inflation in recent history. The CPI has posted more than 65 months of consecutive annual readings above 2%, the longest stretch since the 1990s. Cleveland Federal President Beth Hammack recently remarked that high inflation is becoming a "fact of life" for consumers.
Oil companies are also hitting record highs as crude prices rise amid escalating tensions in the Middle East. ExxonMobil, Chevron, and ConocoPhillips all reached all-time intraday highs, although their shares have since pulled back slightly. Crude prices have increased by 4% this week, trading above $95 per barrel, as conflicts involving Saudi Arabia and Iran-backed Houthi militants intensify.
CoreWeave's stock and bonds took a hit on Wednesday over worries about its heavy borrowing for AI development. The company's shares fell significantly, and its bond yields rose, with its 9.625% bond due in 2032 yielding 14.8% and its 9.75% bond due in 2031 yielding 14.9%.
In the commodities market, Morgan Stanley projects that gold could reach $5,000 per ounce by Q2 2027, driven by strong central bank buying and ETF inflows. Despite macroeconomic challenges, gold's resilience suggests structural demand is counterbalancing these hurdles.
JPMorgan's third-quarter results fell short of expectations, but Wells Fargo's Mike Mayo remains optimistic, citing the bank's guidance for 10% net interest income growth by 2027. Wells Fargo maintains an overweight rating on JPMorgan stock with a price target of $390 per share.
BlackRock shares rose more than 2% after posting strong third-quarter earnings, offering a bright spot on an otherwise difficult day for the stock market.
