U.S. stock indexes saw slumps, falling back into recession

Despite a better-than-expected inflation reading, U.S. stock indexes witnessed declines on Tuesday, falling back into their September recession.

The Dow declined by about 165 points or 0.5%, while the S&P 500 dipped 0.2%. Meanwhile, the Nasdaq Composite traded close to the flatline.

Additionally, stocks tied to the economic rebound led to the turn lower 30 minutes after the open. Moreover, Bank of America led financial shares lower. General Electric (GE) took industrial shares into the red. Tech giants, Microsoft and Amazon, witnessed gains.

The August consumer price index came in less than feared (it still shows a notable rise in inflation). August CPI gained 0.3% month-to-month, or 5.3% from a year earlier, below the 0.4% boost and 5.4% annual increase anticipated.

The less volatile core reading excluding food and energy costs recorded a small rise. It gained 0.1%, below the 0.3% consensus gain anticipated by economists. 

On September 3, the Labor Department announced August’s jobs report, which missed expectations. Since that, stocks have been under pressure

Some Wall Street analysts have announced recently that the market is poised for a correction after doubling from its March 2020 low. However, others say that strong earnings growth and low-interest rates will continue to push equities higher.

The Fed starts a two-day meeting on September 21

The Fed monitors key economic indicators like inflation readings to decide when to taper its pandemic-era easy monetary policy. The Federal Reserve is expected to start a two-day policy meeting on September 21.

Art Hogan, a chief market strategist at National Securities, believes that the Fed will talk about tapering in September. He also added that the Federal Reserve will not announce it until the November meeting and then put it in place before the end of 2021.

The major averages are down at least 1% for September. Additionally, RBC doesn’t see the S&P surging into the end of the year. The company lifted its year-end target for the benchmark index to 4,500 on Monday, up from a previous target of 4,325. The new target is less than 1% above where the index closed on September 13. The company also introduced a 2022 year-end plan of 4,900.

In Washington, House Democrats introduced new tax hikes to pay for the $3.5 trillion spending package. A summary from the Ways and Means Committee revealed that the plan calls for top corporate and individual tax rates of 26.5% and 39.6%.

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