Wall Street edges lower following inflation data, drops for Disney, banks


NEW YORK — Wall Street slipped slightly on Thursday, weighed down by a sharp decline in the Walt Disney Co and rising concerns about the health of some US banks.
The S&P 500 lost 7.02 points, or 0.2%, to 4,130.62, with two out of three stocks in the index falling. The Dow Jones Industrial Average lost 221.82, or 0.7%, to 33,309.51, while the Nasdaq Composite rose 22.06, or 0.2%, to 12,328.51.
Disney was one of the heaviest weights out there. It fell 8.7% after announcing last quarter that it was losing streaming subscribers in the U.S. and Canada, surprising analysts. That’s despite the fact that last quarter’s earnings and sales were roughly in line with Wall Street forecasts.
Some banks, reeling from the industry’s mini-panic, also came under renewed pressure, and PacWest Bancorp fell 22.7% after last week said 9.5% of its deposits had been withdrawn. It said the majority of the flight took place within two days after press reports said the bank was in talks with potential investors and partners, raising concerns among its customers.
Investors are looking for the next possible victim in the US banking sector after high interest rates led to three high-profile bankruptcies since March.
Also down was Peloton Interactive, which fell 8.9%. The company is offering free seat posts after recalling 2.2 million of its exercise bikes. The assembly can break while driving.
Helping to limit losses for the broader market was a report showing that wholesale-level inflation last month was slightly cooler than economists had been expecting. This was followed by a report from the previous day which showed that consumer level inflation was also behaving broadly as forecast.
The reports helped reinforce Wall Street expectations that the Federal Reserve will hold off another rate hike at its next meeting in June. It would be the first time something like this has happened in more than a year.
The Fed has been raising interest rates at a rapid pace to bring the worst inflation in decades under control. Inflation has fallen from its peak last year, but high interest rates have also caused investment prices to plummet, contributed to turmoil in the banking sector and slowed the economy enough that many investors are bracing for a recession later this year.
According to a separate report Thursday, more workers filed for unemployment benefits last week than expected. This is bad news for workers and adds to fears of a possible recession as the labor market has been one of the mainstays of the economy.
However, a cooling job market would also benefit the Fed, which fears that an overly hot job market could put upward pressure on inflation.
Following the reports, government bond yields fell on expectations of a less aggressive Fed. Traders are betting on a high probability that the Fed will have to cut rates later this year. Rate cuts act like steroids for financial markets, but would likely only happen if the economy slips into recession and needs such a boost.
The Fed, meanwhile, has said it is unsure of its next move but doesn’t expect any rate cuts this year if things go as expected.
“While it is encouraging to see moderating inflation and signs of easing in labor conditions, investors should expect volatility on ongoing banking concerns and a still unresolved debt ceiling debate,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
The general concern among banks is that the industry’s problems could lead to a contraction in lending, which would hurt the economy. Meanwhile, the US government is nearing the June 1 deadline, when it could run out of cash if Congress doesn’t allow it to borrow more. Economists say a resulting default by the US government could have disastrous consequences for the economy.
The yield on the 10-year Treasury fell to 3.39% from 3.44% late Wednesday. It helps set interest rates on mortgages and other major loans. The two-year Treasury yield, which is more in line with Fed expectations, fell to 3.90% from 3.91%.
On Wall Street’s winning side was Robinhood Markets, which rose 6.4% after reporting a smaller loss and better-than-expected earnings for the most recent quarter. Added a way for advanced traders to conduct some types of trades 24 hours a day, five days a week.
In overseas markets, London stocks fell 0.1% after the Bank of England hiked interest rates to their highest level since late 2008. This move was widely expected as UK inflation remains high.
Elsewhere in Europe and Asia, stock indices were mixed, with most making only minor movements.

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