Wall St slides as economic data stokes inflation worries, Apple drags

Wall Street stocks fell on Wednesday after stronger-than-expected services sector data fueled concerns of sticky inflation and interest rates staying higher for longer, while weakness in Apple Inc shares further weighed down the indexes, Reuters reported.

The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing Purchasing Managers’ Index rose to 54.5 last month against expectations of 52.5, while a gauge of prices paid by service-sector businesses for inputs increased.

Traders’ bets that the Federal Reserve would pause hiking interest rates at its Sept. 20-21 meeting were 91%, while bets on a pause in November slipped to 46.8% from nearly 57% before the data, the CME FedWatch Tool showed.

“The stronger-than-expected ISM services data shows that investors are still not very skilled at reading the post-pandemic tea leaves,” said Carol Schleif, chief investment officer at BMO’s family office in Minneapolis.

While investors have been hoping for interest rate cuts soon, Schleif said the data shows a strong economy and inflation that is not coming down “as fast as the Fed would need to start cutting rates any time in the foreseeable future.”

Earlier in the day Boston Fed President Susan Collins stressed the need for the central bank to “proceed carefully” with its next monetary policy steps.

The Dow Jones Industrial Average .DJI fell 235.55 points, or 0.68%, to 34,406.42. The S&P 500 .SPX lost 40.09 points, or 0.89%, at 4,456.74 and the Nasdaq Composite .IXIC dropped 179.32 points, or 1.28%, to 13,841.63.

Of the S&P 500’s 11 major industry sectors technology .SPLRCT was the biggest decliner, down 1.6%. Defensive utilities .SPLRCU was the only gainer, up 0.1%.

AppleAAPL.O was the biggest drag across the three major indexes, down 3.7% after a report that China had banned officials at central government agencies from using iPhones and other foreign-branded devices for work.

Other megacaps also declined, with Tesla TSLA.O, Amazon.com AMZN.O and Nvidia NVDA.O down between 1.6% and 3.8% as yields on the 10-year US10YT=RR and the two-year US2YT=RR U.S. Treasuries moved higher after the economic data.

The S&P 500 barely reacted after the Fed’s “Beige Book” snapshot of the U.S. economy was released, a week ahead of the keenly awaited August inflation data and the Fed’s rate decision on Sept. 20.

The report showed “modest” U.S. economic growth in recent weeks while job growth was “subdued,” and inflation slowed in most parts of the country.