Stock market continuing its backslide

Wall Street bracing for report on inflation coming Thursday

NEW YORK — Stocks slipped Wednesday, as Wall Street braced for a highly anticipated report on inflation that’s on the way.

The S&P 500 fell 31.67, or 0.7 percent, to 4,467.71 for its sixth drop in the last seven days. The Dow Jones Industrial Average lost 191.13, or 0.5 percent, to 35,123.36, and the Nasdaq composite sank 162.31, or 1.2 percent, to 13,722.02 as Big Tech stocks led the declines.

Stocks have cooled in August since soaring 19.5 percent through the first seven months of the year. Several reasons are behind the minipullback, including criticism that Wall Street too quickly formed a consensus that inflation will keep cooling, the economy will keep growing and the Federal Reserve has already finished its hikes to interest rates.

A report on Thursday will offer a big clue on how warranted those hopes are. The U.S. government will give the latest monthly update on inflation that consumers are feeling across the country, and economists expect to see an acceleration to 3.3 percent in July from 3 percent in June.

Such a reading would be down sharply from its peak of more than 9 percent last summer, but economists say the last bit of improvement to get inflation down to the Fed’s 2 percent target may be the toughest part.

Fed officials have said repeated recently that their upcoming decisions on interest rates will depend on what the data tells them, and they’ve pointed to reports on inflation and the job market in particular.

“With risks turning increasingly two-sided, Fed officials are beginning to shift the focus toward how long to hold rates steady at sufficiently restrictive levels,” according to economists at Deutsche Bank.

A reading on Thursday that’s much worse than expected could raise fears that the Fed’s job in battling inflation is far from done and that it may have to keep hiking interest rates. At the least, it could push the Fed to keep rates high for longer than expected.

High rates slow inflation by grinding down the entire economy and hurting investment prices. The Fed has already pulled its federal funds rate to the highest level in more than two decades. With rate hikes historically taking a long time to take full effect across the economy, the risk of a recession still remains.

In the meantime, companies continue to offer profit reports for the spring that are mostly better than analysts expected.