Stocks turn lower as inflation concerns temper upbeat earnings

US stocks fell on Wednesday as signs of persistent inflationary pressures dampened optimistic sentiment over the recent spate of corporate earnings.

The benchmark S&P 500 fell 0.6 percent early in the afternoon in New York, posting two straight days of gains. The tech-heavy Nasdaq Composite lost 0.7 percent. In Europe, the regional Stoxx 600 closed 0.5 percent lower.

Those declines came after consumer goods giants Procter & Gamble and Nestlé reported better-than-expected earnings but said sales growth was supported by price hikes.

Data released earlier on Wednesday also showed that Britain’s inflation rate accelerated to 10.1 percent in September, from 9.9 percent in August, on the back of higher food prices. The latest CPI read was above the 10 percent consensus among economists polled by Reuters.

Central banks, led by the US Federal Reserve, have turned monetary policy aggressively this year to curb rapid price growth. The Fed has already increased the cost of borrowing by 0.75 percentage points at each of its last three meetings and raised its target range to 3 to 3.25 percent.

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Concerns have mounted that such a tightening will amplify a protracted economic slowdown, hitting businesses and consumers. Market participants have been watching the recent spate of corporate deals closely for signs of drag from inflation and rising borrowing costs.

Some, including Goldman Sachs and Bank of America, have released better-than-expected earnings. Companies in other sectors have also shown signs of resilience, with Netflix revealing after Tuesday’s closing bell that it had reined in its third-quarter subscriber losses. Popular programs such as stranger things had helped add 2.4 million subscribers, more than double the streaming group’s forecast.

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Netflix shares rose about 14 percent on Wednesday. The group shocked investors in April by revealing that subscriber growth had reversed.

But while global stocks have come under acute pressure so far this year – they have completed three straight quarters of decline last month – some analysts and investors believe the beating isn’t over yet.

“We do not expect a sustained trend reversal any time soon,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management, in a statement. “Indeed, in our view, the risk/reward outlook for markets has turned unfavorable in the near term, reflecting a combination of persistent inflation, rising interest rates, falling growth estimates and heightened financial stress.”

In Treasury markets, the yield on the 10-year Treasury rose 0.13 percentage points to 4.13 percent as the instrument’s price fell.

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The equivalent UK 10-year yield fell 0.06 percentage point to 3.89 percent. The 30-year gilt yield slipped more than 0.3 percentage point and was below 4% for the first time in more than two weeks after the Bank of England decided to exclude longer-dated debt when it starts selling bonds next month bonds begins.

The pound slipped 0.9 percent against the dollar to $1.122, while the greenback gained 0.8 percent against a basket of six peers. The yen hit a new 32-year low at ¥149.81 against the US currency.

The Japanese currency has fallen more than 20 percent this year, fueled by a widening gap between the Bank of Japan’s ultra-loose monetary policy and the tightening trend of many other global central banks.


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