Level 1 - Absolute Beginner
Prices went up more than experts expected. Stocks went down on Wednesday, October 14.
The S&P 500 fell about one percent. The Nasdaq fell about 1.9 percent. The Dow was almost flat.
Inflation was 3.7 percent. Experts thought it would be 3.6 percent. Now investors think interest rates may go up.
Bank of America lost about five percent. Its profit was lower than last year.
- inflation
- a rise in prices over time
- expert
- a person who knows a lot about a subject
- investor
- a person who puts money into something to make more money
- interest rate
- the cost of borrowing money
- profit
- money left after costs
- stock
- a small part of a company that people can buy
- fall
- to go down
- flat
- almost no change
Level 2 - Elementary
Wall Street ended lower on Wednesday after a report showed that prices rose faster than expected in September. Consumer inflation was 3.7 percent, above the 3.6 percent that analysts had forecast.
The S&P 500 fell about 1 percent to 7,718.94, according to CNBC. The Nasdaq dropped about 1.9 percent to 26,692.87, while the Dow Jones Industrial Average slipped about 0.1 percent.
Investors now think the Federal Reserve might raise interest rates instead of cutting them. Technology and chip shares were hit hardest.
Bank earnings also hurt the mood. Bank of America fell about 5 percent after its profit dropped 17 percent. Morgan Stanley beat forecasts, but its shares still lost about 3 percent.
- analyst
- a person whose job is to study and judge a business or market
- forecast
- to say what will probably happen
- consumer
- a person who buys things
- rate hike
- a rise in interest rates
- shares
- parts of a company owned by investors
- earnings
- profit a company reports
- mood
- the general feeling
- slip
- to fall a little
Level 3 - Intermediate
A hotter than expected September inflation reading rattled Wall Street on Wednesday, October 14, lifting bets on a Federal Reserve rate hike and dragging down technology and chip stocks. Consumer prices rose 3.7 percent, against forecasts of 3.6 percent.
The S&P 500 lost about 1 percent to close at 7,718.94, according to CNBC, and the Nasdaq Composite shed roughly 1.9 percent to 26,692.87. The Dow Jones Industrial Average edged down about 0.1 percent, cushioned by defensive names. Final figures differ slightly between data providers.
Third quarter bank results added to the gloom. Bank of America slid about 5 percent after profit fell 17 percent to $6.93 billion, including a $1.2 billion regulatory penalty, and adjusted earnings of $1.08 per share missed the $1.11 consensus.
Morgan Stanley offered a mixed picture: earnings of $3.03 per share and revenue of $20.34 billion topped the $2.91 and $19.95 billion analysts expected, yet the stock still fell around 3 percent as investors focused on the rate outlook.
- rattled
- made nervous or worried
- regulatory
- relating to official rules and the bodies that enforce them
- penalty
- a punishment, often a fine
- consensus
- the general agreement or average view
- cushioned
- made the effect softer
- defensive
- less affected by the economic cycle
- outlook
- the likely future situation
- shed
- to lose
Level 4 - Advanced
The September consumer price report, which showed inflation of 3.7 percent against the 3.6 percent consensus, upended a market that had been counting on the Federal Reserve to stay patient. By the close on Wednesday, October 14, the S&P 500 had lost roughly 1 percent to 7,718.94 and the Nasdaq about 1.9 percent to 26,692.87, per CNBC, while the Dow was nearly unchanged.
The reaction was a repricing of the policy path. Traders who had braced for further easing began to wager on a rate hike, and the growth stocks whose valuations lean on cheap money, chipmakers and artificial intelligence names above all, bore the brunt of the selling.
Bank earnings supplied no refuge. Bank of America tumbled about 5 percent after third quarter profit fell 17 percent to $6.93 billion, burdened by a $1.2 billion regulatory penalty, with adjusted earnings of $1.08 a share missing the $1.11 consensus.
Morgan Stanley, by contrast, outperformed on paper, posting $3.03 a share on $20.34 billion in revenue against expectations of $2.91 and $19.95 billion, yet its shares gave up around 3 percent. The episode illustrates how a strong print can be overwhelmed when the macro backdrop turns hostile.
- upended
- completely disrupted
- repricing
- a change in the prices investors are willing to pay
- braced
- prepared for something unpleasant
- easing
- lowering interest rates to support the economy
- bore the brunt
- suffered the worst of something
- refuge
- a place of safety
- print
- a reported result, informally
- backdrop
- the general conditions in which something happens
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