A slide in big tech and higher energy prices weighed on Wall Street sentiment ahead of inflation data that will help shape the outlook for the Federal Reserve’s next steps.

After briefly wiping out its losses, the S&P 500 finished near session lows. The Nasdaq 100 dropped 1 per cent. Nvidia Corp., which has more than tripled this year amid the artificial-intelligence frenzy, slipped almost 5 per cent. Giants Tesla Inc., Apple Inc. and Amazon.com Inc. were all down. A 28 per cent surge in European natural gas and an advance in oil to a nine-month high added to concern about further price pressures.

“Markets are vulnerable to a period of consolidation,” said Mark Hackett, chief of investment research at Nationwide. “This is not uncommon during the seasonally weak August and September period, though the fundamental strength in economic and earnings data supports higher markets once we emerge from the malaise.”

Thursday’s consumer price index will show a wave of disinflation, but with oil prices rising, headline figures are likely to increase sharply in August, according to Anna Wong at Bloomberg Economics. Still, unless inflation expectations climb substantially, policymakers will remain focused on the core numbers — which should keep moderating as growth slows, she noted.

“Risk-on” expectations for Thursday’s consumer price index have cooled relative to the last couple of reports, according to a survey conducted by 22V Research. Investors aren’t “risk-off,” but are more ambivalent following a string of good releases. The strong wage data from Friday’s employment data has likely gotten attention, the firm noted.

Even if inflation overshoots expectations, the Fed will likely feel its policy is restrictive enough as manufacturing struggles and the jobs market shows signs of softening, according to Fawad Razaqzada, a market analyst at City Index and Forex.com. That means a “small beat” wouldn’t matter too much, he noted.

“A goldilocks outlook in the U.S. is what stock market investors on Wall Street have been enjoying this year – until the recent weakness,” Razaqzada added. “They will be looking for signs that the health and sentiment of the consumer remains positive, enough not increase the risks of a further Fed rate increase, and yet not too depressing to raise recession alarm bells. Somewhere in between could support stocks.”

Meantime, bond investors wanted the newest Treasury 10-year notes badly enough that they were willing to settle for a yield of less than 4 per cent. 

The US$38 billion auction was awarded at 3.999 per cent, becoming the third straight 10-year new issue to pay a fixed rate of less than 4 per cent. Since the auction details were announced on Aug. 2, its bigger-than-anticipated size pushed the yield on the new 10-year in pre-sale trading up toward 4.19 per cent on Friday. Ultimately, investors decided they could live on less.

Corporate Highlights:

• Roblox Corp. fell after reporting that people were spending less time playing its games in the second quarter and missing Wall Street’s estimates.
• Lyft Inc. retreated after the company reported its slowest revenue growth in two years, overshadowing a better-than-expected outlook for earnings, as the company struggles to get its ridership back on track.
• Rivian Automotive Inc. dropped as it expects heavy losses to continue as it boosts production plans for the year and works to reestablish itself as a rising player in the increasingly crowded electric-vehicle market.
• WeWork Inc. declined after saying there’s “substantial doubt” about its ability to continue operating. The company cited sustained losses and canceled memberships to its office spaces.
• Penn Entertainment Inc. rose after Walt Disney Co.’s ESPN has signed a long-term exclusive agreement with the casino operator, licensing its brand for sports betting and deepening the media giant’s ties to the growing online gambling business.
• DraftKings Inc. and Flutter Entertainment Plc fell on concern the deal will increase competition in the sport-betting industry.

Key events this week:

• India rate decision, Thursday
• U.S. initial jobless claims, CPI, Thursday
• Atlanta Fed President Raphael Bostic pre-recorded remarks for employment webinar, Thursday
• UK industrial production, GDP, Friday
• U.S. University of Michigan consumer sentiment, PPI, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.7 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 1.1 per cent
• The Dow Jones Industrial Average fell 0.5 per cent
• The MSCI World index fell 0.3 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.2 per cent to US$1.0975
• The British pound fell 0.2 per cent to US$1.2722
• The Japanese yen fell 0.2 per cent to 143.69 per dollar

Cryptocurrencies

• Bitcoin fell 2 per cent to US$29,392.4
• Ether fell 0.9 per cent to US$1,847.15

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.00 per cent
• Germany’s 10-year yield advanced three basis points to 2.50 per cent
• Britain’s 10-year yield declined two basis points to 4.36 per cent

Commodities

• West Texas Intermediate crude rose 1.7 per cent to US$84.30 a barrel
• Gold futures fell 0.6 per cent to US$1,949 an ounce