Wall Street ends streak of weekly gains, yields rise as investors digest data
Consumer spending climbed slightly more than expected in August while the inflation rate rose to 2.7% from 2.6% in July, data showed, in line with economists’ expectations.
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Analysts said some companies had fended off price pressures by stockpiling in anticipation of tariffs, but some volatility was to be expected ahead of corporate earnings releases in the coming weeks.
“Corporates have been able to withstand (a) tariff hit because they’ve had inventory build. But the earnings season will become the bigger test because many companies have told us they will start some price increases around the end of the year,” said Kevin Gordon, senior investment strategist at Charles Schwab.
Richmond Fed Bank President Thomas Barkin told Bloomberg Television he had very low confidence in inflation forecasts, as tariffs continue to impact the economy.
NOT FALLING OFF A CLIFF
Friday’s personal consumption expenditures index functions as a key component of the Federal Reserve’s inflation outlook.
U.S. Treasury yields, which influence borrowing costs, moved little after the data was released.
The yield on benchmark U.S. 10-year notes rose 0.7 basis points to 4.181%, from 4.174% late on Thursday. The 30-year bond yield rose 0.5 basis points to 4.7576% from 4.753% late on Thursday.
“The one bright spot was that income and spending were a little bit firmer than expected, which means the consumer isn’t falling off a cliff as the market was expecting,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities.
Gold, a safe haven which usually benefits from lower interest rates, broadly held on to recent gains. Spot prices were last quoted 0.46% higher at $3,766.25 an ounce.
Investors now estimate an 89.8% probability of a rate cut in October and a 67% chance of another in December, the CME FedWatch Tool shows.
Oil prices rose as Ukrainian drone attacks on Russia infrastructure cut the major energy producer’s exports.
Brent futures settled at $70.13 a barrel, up 71 cents, or 1.02%. U.S. West Texas Intermediate (WTI) crude finished at $65.72 a barrel, gaining 74 cents, or 1.14%.
Reporting by Naomi Rovnick. Additional reporting by Rae Wee; Editing by Kate Mayberry, Stephen Coates, Aidan Lewis, Chizu Nomiyama and Cynthia Osterman
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