Rising Expectations for Inflation Negative Attitude as Equity Markets Decline

On Tuesday, US stocks largely declined as inflation predictions increased and consumer confidence decreased.

The S&P 500 dropped 0.2% to 3,957.63 while the Nasdaq Composite dropped 0.6% to 10,983.80. At 33,852.53, the Dow Jones Industrial Average was essentially unchanged. Sector-wise, consumer discretionary, utilities, and technology all experienced significant falls; meanwhile, real estate, oil, and financials were the top gainers.

According to The Conference Board, persistently high gas costs and lingering inflation worries kept people up at night over the holiday shopping season, causing consumer confidence to continue to decline in November almost in line with projections. The organization's confidence index fell from October's downwardly revised rating of 102.2 to 100.2 this month.

According to a note from Jefferies, the median predicted rate of inflation jumped from 6.1% to 6.2% for the next 12 months, with the average expected rate jumping to 7.2% from 6.9% in October.

The wide gap between the average and the median indicates that there are still a significant number of people who are concerned that they will experience another year of price increases similar to those experienced in 2021 and 2022, according to Thomas Simons and Aneta Markowska of Jefferies. "The [Federal Reserve] isn't overly concerned about short-term inflation expectations, but this is going in the wrong direction," they added.

According to S&P Dow Jones Indices, a division of S&P Global SPGI, US home values continued to decline sequentially in September as annual advances slowed due to ongoing macroeconomic challenges. Nationally, the S&P CoreLogic Case-Shiller Index reported a loss of 0.8% month over month after seasonal adjustment, down from 0.9% the month before.

US home prices increased 0.1% sequentially in September, according to the Federal Housing Finance Agency, following a 0.7% loss the previous month and beating Wall Street projections of a 1% decline.

The yield on the US 10-year note rose 5 basis points to 3.75%.

In recent corporate news, it has been stated that the loosened COVID-19 control procedures would resume on Wednesday in Zhengzhou, a city in central China that is home to Apple's largest iPhone manufacturing facility. Wedbush analysts predicted "severe" iPhone production shortages for the holiday season on Monday as a result of recent demonstrations in Chinese towns over the nation's tough COVID regulations and rumours of protesting employees at Apple supplier Foxconn in Zhengzhou. The weakest performer on the Dow was the iPhone manufacturer, whose shares slumped 2.1%.

Pinduoduo PDD rose 5.9% to rank among the top gainers on the Nasdaq after numerous brokerages increased their price targets for the stock of the company. Citigroup increased its price objective from $79 to $111 while keeping a buy recommendation.

Crude oil futures for West Texas Intermediate increased by 1.7% to $78.55.

Silver increased 1.3% to $21.40 per ounce, and gold increased 0.4% to $1,762.70 per troy ounce.