Stock market today: Wall Street edges back from its records

NEW YORK — (AP) — U.S. stocks are edging down from their records Thursday following a pair of disappointing reports that showed inflation failed to improve as much as expected last month and more workers filed for unemployment benefits last week.

The S&P 500 was 0.3% lower in early trading. The Dow Jones Industrial Average was down 65 points, or 0.2%, after likewise setting an all-time high the day before. The Nasdaq composite was 0.5% lower, as of 9:35 a.m. Eastern time.

Stocks have stormed to records in large part on excitement about easing interest rates, now that the Federal Reserve is cutting them from their two-decade high, as it widens its focus to include keeping the economy humming instead of just fighting high inflation.

Lower interest rates ease the brakes off the economy and juice prices for investments, but further cuts will depend in part on if inflation continues to head down toward the Fed’s 2% target as it expects.

Thursday’s report showed inflation slowed to 2.4% in September from 2.5% in August, according to the consumer price index, but economists were expecting an even sharper slowdown to 2.3%. And after ignoring the swings for food, gasoline and other energy prices, underlying trends that economists say can be a better predictor for where inflation is heading were also a touch hotter than expected.

At the same time, a separate report showed 258,000 U.S. workers filed for unemployment benefits last week. That number is relatively low compared with history, but it was a sharper acceleration than economists expected.

In the bond market, investors had an unsteady initial response to the data. Treasury yields rose at first before eventually giving back the gains in a herky-jerky descent.

The yield on the 10-year Treasury was most recently at 4.08%, up from its 4.07% level late Wednesday. The two-year yield, which more closely tracks expectations for the Fed, fell to 3.98% from 4.02% late Wednesday.

Traders are still mostly convinced the Fed will cut its main interest rate by the traditional size of a quarter of a percentage point at its next meeting, according to data from CME Group. But some are holding onto bets that it could leave the federal funds rate steady in November. That's after many traders earlier this month were calling for a bigger-than-usual cut of half a percentage point, before a set of stronger-than-expected data on the economy wiped out such calls.

“Unless the jobs report that comes out on November 1st shows a dramatic drop in employment,” a traditional-sized cut of a quarter of a percentage point “might even come across as a little aggressive,” said Brian Jacobsen, chief economist at Annex Wealth Management.

Investors have a long history of being overly zealous in their calls for cuts to rates by the Federal Reserve.

On Wall Street, Delta Air Lines lost 1.8% after reporting weaker results for the summer than analysts expected. The company said bookings for holiday travel are strong, but it's anticipating a drop in flying around the election.

In stock markets abroad, Hong Kong’s Hang Seng jumped 3% for its latest sharp swing.

After rising on hopes for stimulus to prop up the world's second-largest economy, Chinese stocks slumped earlier this week on disappointment that more isn't on the way. But there's still hope that more may come.

Oil prices, meanwhile, rose to claw back some of their sharp giveback from earlier in the week. A barrel of Brent crude rose 1.4% to $77.66. A barrel of benchmark U.S. crude gained 1.4% to $74.27.

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AP Business Writers Yuri Kageyama and Matt Ott contributed.

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