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(Reuters) – Wall Street’s main indexes edged lower on Thursday dragged down by technology and growth stocks as investors worried about the U.S. Federal Reserve’s aggressive approach to tame inflation ahead of an interest rate decision next week.
The three main indexes were struggling for momentum after a hot consumer price inflation reading on Tuesday sparked the worst selloff in more than two years.
Data earlier on Thursday showed U.S. retail sales unexpectedly rose 0.3% in August, in a sign the economy could tolerate higher interest rates as the Fed tightens monetary policy.
A separate report from the Labor Department showed initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 213,000 for the week ended Sept. 10, signaling labor market resilience.
“The economic conditions are quite good in the U.S. and it’s pretty compatible with the path of the 75-basis-point hike for the next meeting,” said Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers Solutions.
“If investors are still underestimating the Fed’s determination to fight against inflation, one of the key concerns is that we’ll see volatility increase in the coming weeks.”
Money markets are pricing in an 80% chance of a 75-basis-point hike, while placing 20% odds of a 100-bps hike next week.
The yield on two-year Treasury notes, a bellwether for interest rate expectations, touched new 14-year highs at 3.85%. [US/]
Shares of rate-sensitive growth and technology stocks slipped alongside a rise in bond yields.
Apple Inc (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) Inc fell about 1.0% each. Netflix Inc (NASDAQ:NFLX) gained 5.1% as Evercore ISI upgraded the stock to “outperform”.
Banks, which tend to benefit from a rising rate environment, gained 2.1%. Healthcare stocks got a boost from health insurer Humana Inc (NYSE:HUM)’s strong earnings forecast.
At 10:43 a.m. ET, the Dow Jones Industrial Average was up 14.73 points, or 0.05%, at 31,149.82, the S&P 500 was down 14.42 points, or 0.37%, at 3,931.59, and the Nasdaq Composite was down 62.03 points, or 0.53%, at 11,657.65.
Union Pacific (NYSE:UNP) and Norfolk Southern (NYSE:NSC) gained about 3% each after U.S. railroad operators and unions secured a tentative deal to avert a rail shutdown that could have hit food and fuel supplies across the United States.
CSX Corp (NASDAQ:CSX) slipped 1.8% after it said Chief Executive Officer James Foote will retire this month.
Adobe (NASDAQ:ADBE) Inc slumped 13.6% after the photoshop maker said it would buy Figma in a cash-and-stock deal that valued the online design startup at about $20 billion.
Declining issues outnumbered advancers for a 1.07-to-1 ratio on the NYSE. Advancing issues outnumbered decliners for a 1.25-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week high and seven new lows, while the Nasdaq recorded seven new highs and 80 new lows.
