What’s driving markets

The July U.S. consumer-price index (CPI) report released at 8.30 a.m. Eastern showed a cooling headline inflation and a sticky core inflation.

The consumer price index was unchanged in July, compared with the 1.3% gain in the prior month, according to the Labor Department. Economists polled by The Wall Street Journal had estimated a 0.2% gain in July.

The rate of inflation in the 12 months ended in July slowed to 8.5% from a 41-year high of 9.1% in June.

The closely-watched core measure of inflation that omits volatile food and energy prices rose 0.3% in July, a slower pace from a 0.5% gain in the prior month. The 12-month rate remained steady at 5.9%.

Investors have been eager to see that inflation has peaked. Equities have been roiled in 2022 but despite bouncing off its mid-June low, the S&P 500 index remains down 13.5% for the year to date. The drop has been driven by fears that multidecade-high inflation will batter consumer confidence, cause the Federal Reserve to hike borrowing costs aggressively and tip the U.S. economy into recession.

See: U.S. consumers likely got some relief from sizzling price increases in July but Fed won’t feel any better

After the inflation report was released, the dollar index
DXY,
-1.09%
was down 1% to 105.28 and U.S. 10-year Treasury yields
TMUBMUSD10Y,
2.739%
eased 7.9 basis points to 2.705%.

Damping sentiment is a recent rash of poorly-received corporate news. There is particular concern about the health of the semiconductor sector after Micron
MU,
-3.74%
followed Nvidia
NVDA,
-3.97%
with a warning about revenues. The PHLX Semiconductor Index
SOX,
-4.57%
fell 4.6% on Tuesday and is down 27.4% so far in 2022.

In addition, a recent rally in badly battered former bull market darlings has come to a juddering halt in the past few sessions, also hurting retail investor confidence. And some are due for more pain on Wednesday.

Shares in crypto exchange Coinbase
COIN,
-10.55%
were down a further 5.5% in premarket action after reporting a billion dollar second quarter loss, and Roblox
RBLX,
-3.17%,
the videogame group, plunged 17.4% after a key sales metric declined for the second consecutive quarter.

Companies in focus

• Sweetgreen Inc.
  SG,
  -4.21%
  shares plunged 22.8% after the salad restaurant chain’s second-quarter financial results missed Wall Street’s expectations. 

• Shares of Plug Power Inc. PLUG dipped 0.6% in premarket trading Wednesday after the hydrogen fuel-cell company fell shy of expectations with its latest revenue and earnings.

• Wendy’s Co.
  WEN,
  -0.47%
  shares lost 0.5%, after the fast-food company posted weaker-than-expected revenue for the second quarter. 

How are other assets faring

• Oil futures were softer, with U.S. WTI
  CL.1,
  -0.15%
  off 0.8% to $89.73 a barrel.

• Gold
  GC00,
  +0.16%
  fell 0.3% to $1,807 an ounce and bitcoin
  BTCUSD,
  +4.19%
  lost 0.8% to $22,964.

• Asia markets were softer following Wall Street’s overnight lead and after data showed China’s inflation at a two-year high. The Shanghai Composite
  SHCOMP,
  -0.54%
  lost 0.5%, Hong Kong’s Hang Seng
  HSI,
  -1.96%
  shed 2.2% and Japan’s Nikkei 225
  NIK,
  -0.65%
  fell 0.65%. In Europe the Stoxx 600
  SXXP,
  +0.71%
  retreated 0.2%.