Wall Street continued to slide in midday trading Thursday after initially finding some relief in tamer-than-expected inflation data, a day after worries about rising rates and trade tensions sparked a sharp sell-off in global markets.
After suffering its steepest drop since February in the previous session, the Dow Jones industrial average was down about 100 points around 1 p.m. ET. Trading below its 200-day moving average, the S&P 500 shed 0.4% and was on track to extend its longest losing streak since the 2016 election. The Nasdaq Composite recovered slightly, up 0.3%, on the heels of its worst day since the Brexit referendum.
An anxiously-awaited inflation reading came in below expectations during premarket trading. The consumer price index rose 0.1% in September, according to the Labor Department, compared with forecasts for up 0.2%. Government data out a day earlier showed the producer price index rebounded to a seasonally adjusted 0.2% after two months of declines.
“The #MAGA theme is unraveling a bit over the past few sessions as two-sided risks have been injected into the US equity market,” Mark McCormick, head of North American FX strategy at TD Securities, wrote in an email. “The marked selloff in rates is the clear catalyst, though that reflects the slow-burning theme of the end of easy money.”
Treasury yields retreated from multi-year highs following the inflation data and as investors flocked to the relative safety of US government bonds. As the economy hums along, the Federal Reserve is expected to continue tightening after increasing rates three times this year and eight times since the financial crisis.
President Donald Trump directly blamed the Fed for the sell-off and called the increases “ridiculous,” a move that breaks precedent and that can cast doubt on the independence of a central bank. There is a strong consensus among economists and bipartisan lawmakers that increasing the cost of borrowing can be necessary at times to avoid overheating and high levels of inflation.
The Cboe Volatility Index, a measure of expected volatility on the S&P 500, fell as much as 5% to 21.07 but held close to its highest level since February. Also known as Wall Street’s “fear index,” the VIX tends to rise when stocks are down.
Oil prices fell after OPEC said its production rose in September, easing concerns about a drop-off in Iranian barrels as US sanctions loom. The cartel also downgraded its global demand forecast for a third straight month amid concerns about the prospect of slowing economic activity around the world.
In a report out earlier this week, the International Monetary Fund painted a dimmer picture of its outlook for the world economy than had been previously outlined. The international lender cited trade tensions and emerging markets as it downgraded its global growth forecast for this year and next.
Trade-sensitive stocks trimmed losses after the Wall Street Journal reported Trump will meet with Chinese leader Xi Jinping at a multilateral summit at the end of November. Boeing and Caterpillar have both fallen more than 5% this week as Trump continues to threaten additional tariffs, saying Thursday he could “do a lot more” in his trade war with Beijing.