Wall Street's main indexes closed slightly lower on Wednesday after a U.S. inflation reading came in hotter than expected, while many investors stuck to the sidelines ahead of AI bellwether Nvidia's earnings later in the day.
A Commerce Department report showed annual U.S. inflation increased 3.7% in the 12 months through July, a touch above expectations. Separate data showed the economy grew 1.5% in the second quarter.
The latest print added another wrinkle to the Federal Reserve's policy outlook, raising the stakes for upcoming economic data. Investors will focus sharply on Fed Chair Kevin Warsh's Jackson Hole speech on Friday.
"It wasn't enough to shift the balance for September's meeting, but if subsequent data point in the same direction, the Fed may feel more pressure to move off the sidelines," said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
The central bank's next scheduled meeting is in September, putting the policy decision in focus during what is historically a weak month for equities. Odds of an interest rate hike at that meeting stand at 38.1%, according to the CME FedWatch tool.
"There is no crisis, it is more about expectations or guidance we are going to get from the Fed and what the Treasury is trying to do. That blends to some uncertainty and basically increases the risk premium," said Greg Tuorto, head of U.S. small and midcap investing at Goldman Sachs Asset Management.
"But on the other side, on the positive side, the underlying economic environment is really good. Earnings for the companies that we own and some of the larger cap companies are standout," he said.
The Dow Jones Industrial Average .DJI fell 113.52 points, or 0.21%, to 53,463.88, the S&P 500 .SPX lost 1.58 points, or 0.02%, to 7,675.70 and the Nasdaq Composite .IXIC lost 21.10 points, or 0.08%, to 26,130.20.
SPY•
