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Wall Street drops amid inflation, rate hike worries

By Ankika Biswas and Shreyashi Sanyal

(Reuters) -Wall Street's main indexes fell on Thursday on concerns about persistent inflation and the Federal Reserve's aggressive rate-hike cycle, while shares of Tesla (NASDAQ:TSLA) slipped on worries over funding for Elon Musk's proposed buyout of Twitter.

Before dropping, markets briefly took comfort from data which showed an increase in weekly jobless claims as it raised hopes of the Fed likely to go easy with its rapid rate hikes.

"The jobless claims in and of itself don't mean a huge amount; the thing is that none of this is bad enough yet to really speak seriously about a Fed pivot," said David Russell, vice president at Market Intelligence at TradeStation Group.

Further, Minneapolis Fed President Neel Kashkari said the U.S. central bank is "quite a ways away" from being able to pause its aggressive interest-rate hikes.

Data showed the number of Americans filing new claims for unemployment benefits rose more than expected last week, but the labor market remains tight even as demand is cooling amid higher interest rates.

This comes a day ahead of closely watched monthly non-farm payrolls numbers on Friday, which will help investors assess the quantum of the Fed's future rate hikes.

Money markets are pricing in an over 85% chance of a fourth straight 75-basis-point rate hike at the Fed meet in November.

The benchmark 10-year Treasury yield initially moved lower before rising to a one-week high, weighing on rate-sensitive growth stocks including Meta Platforms Inc, Inc (NASDAQ:AMZN), and Nvidia (NASDAQ:NVDA) Corp. [US/]

Tesla Inc fell 0.5% as Apollo Global Management (NYSE:APO) Inc and Sixth Street Partners, which had been looking to provide financing for Musk's $44-billion Twitter deal, are no longer in talks with the billionaire.

Alphabet (NASDAQ:GOOGL) Inc edged 0.77% higher after the launch of Google's new phones and its first smartwatch.

Oil prices held their three-week highs after the OPEC+ group of nations' largest supply cut since 2020 ahead of European Union embargoes on Russian energy is set to tighten global oil supply.

"We continue to have the situation of big hikes at the next two meetings at least and an increased risk now with energy prices after that big OPEC move," Russell said.

Among the 11 major S&P 500 sector indexes, only the energy sector index was up, adding more than 1%.

At 12:50 p.m. ET, the Dow Jones Industrial Average was down 128.16 points, or 0.42%, at 30,145.71, the S&P 500 was down 12.08 points, or 0.32%, at 3,771.20, and the Nasdaq Composite was down 2.05 points, or 0.02%, at 11,146.59.

Growing fears of a looming recession in corporate leadership is expected to weigh on capital spending and job openings, Goldman Sachs (NYSE:GS) said in a note. Declining issues outnumbered advancers for a 1.73-to-1 ratio on the NYSE and for a 1.14-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 26 new lows, while the Nasdaq recorded 28 new highs and 85 new lows.


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