Stocks edged modestly higher Wednesday, with stocks looking to extend their two-day rally in the face of another set of disappointing U.K. inflation data that clipped investor sentiment and pushed the dollar deeper into the green against its global peers.
Britain's September inflation rate jumped to a fresh 40-year high of 10.1% last month, official figures indicated Wednesday, in a move that is likely to trigger faster and deeper rate hikes from the Bank of England.
Ordinarily, markets would glide past regional inflation readings, but with the BoE poised to begin selling bonds from its multi-trillion balance sheet, and the government still in chaos following the scrapping of its weeks-old economic plans, investors are worried that Britain's inner turmoil could spillover once again into the broader financial system.
The U.S. dollar index, which tracks the greenback against a basket of global currencies and often acts as a proxy for broader risk sentiment, rose 0.47% overnight to 112.660 while benchmark 10-year Treasury bond yields added 8 basis point to change hands at 4.11%, the highest since 2008.
That left investors in a relatively defensive mood heading into the Wednesday session, with housing and mortgage data due before the start of trading and third quarter earnings from Tesla and IBM expected after the closing bell.
The CBOE group's key volatility gauge was also on the move, rising 3.2% from yesterday's levels to 31.48 points, suggesting daily swings of around 73 points over the next 30 days for the biggest U.S. benchmark.
The Mortgage Bankers' Association published another jump higher in benchmark mortgage rates, which came in just below the 7% level amid a rise of more than a full percent since early August.
Government data is also showed an 8.1% slowdown in housing starts, which came in at an annualized rate of 1.439 million units, as projects are delayed amid the ongoing surge in building costs and the pullback in demand linked to higher mortgage costs.
Oil markets were also in focus Wednesday with the Energy Department's weekly stockpile data, which showed a 1.7 million barrel decline over the period ending on October 15, as well the details of President Joe Biden's plan to sell-off the remaining portion of crude taken from the 180 million barrels taken Strategic Petroleum Reserve earlier this year.
WTI crude futures were marked $2.81 higher Wednesday trading at $85.63 per barrel, while Brent contracts for December added $2.11 to $92.14 per barrel.
On Wall Street, the S&P 500, which has gained 6.3% since Thursday's open, finished down 0.66%, while the Dow Jones Industrial Average lost 98 points, or 0.32%, to 30,425. The tech-focused Nasdaq slipped 0.85%.
Netflix (NFLX) shares surged 13.1% after the streaming and media service shocked investors with much better-than-expected third quarter earnings ahead of its ad-supported platform launch.
Tesla (TSLA) shares rose 0.84% ahead of the clean energy carmaker's third quarter earnings after the closing bell. Tesla is expected to report a bottom line of $1 per share, up from 62 cents over the same period last year, on record revenues of $21.96 billion.
United Airlines Holdings (UAL) shares, meanwhile, gained almost 5% after the carrier posted stronger-than-expected third quarter earnings while forecasting firmer end-year profits thanks to the ongoing boom in global travel demand.
Procter & Gamble (PG) gained nearly 1% after it posted stronger-than-expected first quarter earnings but clipped its full-year sales forecast owing to currency headwinds linked to the surging U.S. dollar.
Stocks in Europe were lower, with London's FTSE 100 down 0.27% on the session and the region-wide Stoxx 600 falling 0.5% in early Frankfurt trading. Overnight in Asia, Japan's Nikkei 225 ended 0.37% higher as the yen fell to another 32-year low of 149.184 against the dollar, while the MSCI ex-Japan index fell 1.11% into the final hours of trading.
