Stock Market Today: Stocks Fall as Inflation Fears Ramp Up

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Stocks closed lower again Wednesday as rising oil prices and good-news-is-bad-news economic data weighed on investor sentiment. Rate-sensitive tech and tech-adjacent stocks were some of the day's biggest losers as Treasury yields rose.

The main benchmarks opened in negative territory and stayed there for the entire session. At the close, the Dow Jones Industrial Average was down 0.6% at 34,443, the S&P 500 was off 0.7% at 4,465, and the Nasdaq Composite was 1.1% lower at 13,872.

Mega-cap tech stock Apple (AAPL) – which carries an outsized weighting in both the S&P 500 and Nasdaq – slumped 3.6% amid media reports that China is widening the scope of government workers that are not allowed to use iPhones and other foreign-branded devices while at work. China is one of Apple's largest markets, accounting for more than 19% of total sales in its most recently reported quarter.

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Analysts are still overwhelmingly bullish on the blue chip stock. Of the 45 analysts covering AAPL tracked by S&P Global Intelligence, 22 say it's a Strong Buy, eight have it at Buy, 13 call it a Hold and two believe it's a Sell. This works out to a consensus Buy recommendation.

ISM services sector index hits six-month high

Also keeping stocks lower today was the Institute for Supply Management's services sector index, which jumped to a higher-than-expected 54.5% in August from 52.7% in July. This was the eighth straight month the index reading was above the 50% mark that indicates expansion and was the highest level since February.

"The ISM services sector report underscores the resilience of the largest portion of the economy as the headline print came in higher than expectations, underpinned by a stronger new orders metric," says Quincy Krosby, chief global strategist for LPL Financial. The report is "certainly not good news for a data dependent Fed," Krosby adds, and with "oil and food prices also higher, this report points to a Fed whose job to quell inflation is certainly not yet quite finished."

Oil prices keep rising

Taking a look at those oil prices, they continued to climb today following this week's news that Saudi Arabia and Russia will extend crude production cuts for the next several months. U.S. crude futures jumped 1% to $87.54 per barrel, their highest settlement since June 2022.

Oil prices are now up nearly 11% in the past two weeks – and more upside could temporarily halt the disinflation trend we've seen in recent months. "Going forward, higher oil prices are likely to support overall inflation and have a less direct but nonetheless notable impact on core inflation," says José Torres, senior economist at Interactive Brokers.

As for the impact today's economic data and rising oil prices have on rate-hike expectations, futures traders are now pricing in a 93% probability the Fed will keep interest rates unchanged at its September meeting, up from yesterday's 90%, according to CME Group. Chances for a November rate hike ticked slightly higher, to 45.3% from 42.0%.

With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.