Stocks Trend Lower Wednesday

U.S. Market
U.S. stocks were lower in early trading Wednesday as investors digested the latest consumer price index report and earnings news.

The Labor Department reported Wednesday that consumer prices increased 0.1% in July, the sixth month in a row, suggesting that inflation might be rising enough to warrant a rate increase by the Federal Reserve as early at its next meeting in September.

At midday the Dow, the S&P 500, and the Nasdaq were each down around 1.2%.

Stocks on the Move
Shares of Target (TGT) gained 0.3% after the company reported second-quarter results. Morningstar equity analyst Ken Perkins notes that we may raise Target's fair value estimate modestly after the firm's results exceeded our internal forecasts because of lower-than-expected selling, general, and administrative expenses. However, Perkins notes that Target could face pressure from Amazon and other efficient operators down the road. "While the earnings results suggest that near-term trends will remain positive for Target, we caution investors against extrapolating near-term improvements (off of weaker comparisons) into the long term and would exercise caution at current levels," Perkins said.

We do not plan to change our investment thesis on tobacco producers after a UK government agency report suggested that electronic cigarettes, or e-cigs, are less harmful than conventional cigarettes. "We are maintaining our wide economic moat ratings for British American Tobacco (BTI), Imperial Tobacco Group (ITYBY) and Philip Morris International (PM), as we do not believe that these findings alter our cash flow forecasts for these firms, and we are reiterating our fair value estimates for all three firms," Morningstar senior equity analyst Philip Gorham said. Shares of British American Tobacco fell 1.8%, Imperial Tobacco shed 0.3%, and Philip Morris International fell 1%.

Foreign Markets
European markets were mixed. The FTSE 100 was down 1.9%, Germany’s DAX fell 2.1%, and the Paris CAC was down 1.8%.

Asian shares regained some lost ground. The Shanghai Composite rose 1.2%, the Nikkei 225 fell 1.6%, and the Hang Seng was down 1.3%.