US stocks have pulled back from record highs this afternoon following reports indicating weaker-than-expected progress on inflation and an increase in unemployment benefit claims.
The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all fell by 0.3%. These declines came after the indices had reached all-time highs, buoyed largely by enthusiasm over easing interest rates as the Federal Reserve shifts its focus from solely combating high inflation to also supporting economic growth.
Interest rate cuts, starting from two-decade highs, have been stimulating the economy and boosting investment prices. However, the continuation of these cuts depends on whether inflation trends closer to the Fed’s 2% target.
Today’s data revealed that inflation cooled slightly to 2.4% in September from 2.5% in August, based on the consumer price index. However, economists had anticipated a more substantial decrease to 2.3%. Excluding volatile items like food and energy, the core inflation indicators, which can better forecast future inflation trends, were also unexpectedly high.
Additionally, a separate report indicated that 258,000 US workers filed for unemployment benefits last week—a relatively low historical number, but higher than economists had forecast.
In response, Treasury yields fluctuated sharply as bond market traders assessed the potential implications for future Federal Reserve policies.
