ASX set to fall as Wall Street tumbles on inflation worries

Inflation, though cooling in some areas of the economy, remains stubbornly hot overall. A survey from the University of Michigan on Friday showed that consumers raised their expectations for future inflation. It also showed that overall consumer confidence remains surprisingly strong despite high prices on a wide range of goods.

“Core inflation is running at levels that are too high, and the University of Michigan’s numbers today show that it is starting to feed into consumers’ expectations, and that’s almost exactly to a ‘T’ what the Fed would like to avoid,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

The S&P 500 fell 86.84 points to 3,583.07. The Dow dropped 403.89 points to 29,634.83. The Nasdaq slid 327.76 points to close at 10,321.39.

Small company stocks also fell sharply. The Russell 2000 gave up 46.01 points, or 2.7 per cent, to close at 1,682.40.

Bond yields rose after the Michigan report. The yield on the 10-year Treasury, which influences mortgage rates, rose to 4.02 per cent from 3.86 per cent shortly before the report came out. It’s trading near its highest level since 2008.

The yield on the 2-year Treasury, which tends to track expectations for future Fed action, rose to 4.51 per cent from 4.40 per cent just before the report came out.

Investors also focused on the latest earnings reports for more clues about how companies are dealing with inflation.

Several big banks were bright spots in the market. JPMorgan Chase rose 1.7 per cent after reporting earnings and revenue that topped Wall Street forecasts. Wells Fargo rose 1.9 per cent after it reported strong revenue.

UnitedHealth Group rose 0.6 per cent after raising its profit forecast for the year.

More than 90 per cent of the stocks in the S&P 500 closed in the red. Technology stocks were biggest weights on the index. Chipmaker Nvidia fell 6.1 per cent.

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US crude oil prices fell 3.9 per cent and weighed down energy stocks. Chevron fell 3.1 per cent.

Markets in Europe closed higher after British Prime Minister Liz Truss has abandoned a planned cut to corporation taxes, scrapping a key part of an economic plan that set off weeks of market and political turmoil.

A government report showed that the pace of sales at US retailers was unchanged in September from August as rising prices for rent and food chipped away at money available for other things. The report was worse than economists anticipated.