By Sinéad Carew and Shristi Achar A

(Reuters) – Wall Street’s three major averages closed lower on Wednesday with the Nasdaq leading declines after stronger-than-expected services sector data fueled concerns that still sticky inflation would mean that interest rates stay higher for longer.

The Institute for Supply Management (ISM) said on Wednesday that its non-manufacturing Purchasing Managers’ Index rose to 54.5 last month against expectations of 52.5, while a gauge of prices paid by service-sector businesses for inputs increased.

Traders were betting on a 91% change that the Federal Reserve would leave interest rates unchanged after its meeting on Sept. 20, while bets on another pause in November were around 55%, CME Group’s FedWatch Tool showed.

“The stronger-than-expected ISM services data shows that investors are still not very skilled at reading the post-pandemic tea leaves,” said Carol Schleif, chief investment officer at BMO’s family office in Minneapolis.

While market participants have been hoping for interest rate cuts soon, Schleif said the data shows a strong economy and inflation that is not coming down “as fast as the Fed would need to start cutting rates any time in the foreseeable future.”

Earlier in the day Boston Fed President Susan Collins stressed the need for the central bank to “proceed carefully” with its next monetary policy steps.

The prospect of higher rates put particular pressure on growth stocks with the S&P 500 growth index underperforming the benchmark throughout the session. Equity investors were also reacting to rising yields in 10-year and the two-year U.S. Treasuries.

“Growth stocks have been pricing in the idea that inflation has been well anchored and that the Fed’s going to cut. If that idea no longer holds they’re going to be vulnerable,” said Patrick Kaser, portfolio manager from Brandywine Global.

On top of rate concerns Apple Inc took added pressure from a report said China had banned officials at central government agencies from using iPhones and other foreign-branded devices for work.

According to preliminary data, the S&P 500 lost 31.05 points, or 0.69%, to end at 4,465.78 points, while the Nasdaq Composite lost 148.48 points, or 1.05%, to 13,873.99. The Dow Jones Industrial Average fell 201.61 points, or 0.58%, to 34,440.36.

Of the S&P 500’s 11 major industry sectors, growth-heavy technology was the biggest decliner while energy was supported by higher oil prices.

The S&P 500 showed little reaction to the Fed’s “Beige Book” snapshot of the U.S. economy a week ahead of the keenly awaited August inflation data and the Fed’s rate decision on Sept. 20.

The report showed “modest” U.S. economic growth in recent weeks while job growth was “subdued,” and inflation slowed in most parts of the country.

Oil futures settled up on Wednesday adding to concerns that a recent uptick in the commodity price would add to inflationary pressure.

Lockheed Martin shares fell sharply after the U.S. weapons maker trimmed the delivery outlook for its F-35 jets.

Roku shares rose after the company said it would reduce its workforce by about 10% and limit new hiring.

(Reporting by Sinéad Carew in New York, Shristi Achar A and Amruta Khandekar in Bengaluru; Editing by Vinay Dwivedi and Richard Chang)

By Raphael Satter

WASHINGTON (Reuters) -The recently disclosed Chinese hack of senior officials at the U.S. State and Commerce Departments stemmed from the compromise of a Microsoft engineer’s corporate account, Microsoft Corp said in a blog post on Wednesday.

Microsoft said the engineer’s account had been penetrated by a hacking group it dubs Storm-0558, which is alleged to have stolen hundreds of thousands of emails from top American officials including Commerce Secretary Gina Raimondo, U.S. Ambassador to China Nicholas Burns and Assistant Secretary of State for East Asia Daniel Kritenbrink.

The blog post issued on Wednesday addressed some of the unanswered questions around the incident, which drew fresh scrutiny to Microsoft’s security and led to calls to investigate the company’s practices.

Notably, the post explained how hackers were able to extract a cryptographic key from the engineer’s account and use it to access email accounts that the key should not have given them access to.

Microsoft said it had fixed the flaws that led to the key being accessible from the unidentified engineer’s account and giving the hackers such wide latitude to steal emails.

Microsoft did not immediately respond to a request for further information about the incident. The Chinese Embassy in Washington did not immediately return an email. Beijing has previously described the allegation that it stole emails from top U.S. officials as “groundless narratives.”

(Reporting by Raphael Satter; editing by Jonathan Oatis and Sandra Maler)

US Tech Giants under Siege as EU Digital Market Act Looms

Microsoft and Apple stock plunged amid reports they face fresh investigations from the European Union regulators. The new probe pertains to a new digital markets clampdown that target’s close to 22 services offered by some of the biggest tech giants. Google, Amazon, and Meta are the other tech giants targeted as part of the new Digital Markets Act poised to come into effect early next year.

EU Digital Markets Act

Under the new act, it will be illegal for tech giants to favor their own services over those of rivals. Additionally, the companies will be prohibited from combining personal data across different services or using data they collect from third-party merchants to compete against their rivals. In addition, the companies will have to allow users to download apps from rival platforms, which takes a significant swipe on Apple’s iOS platform.

Under the new obligations, Apple will have to open up its ecosystem to allow iPhone and iPad users to download apps from rival app stores. Apple has already downplayed the push, insisting that such actions will pose significant privacy issues and data risks.

Tech Giants Targeted

Meta is another tech giant targeted by the new EU Digital Markets Act, as it will be prohibited from combining user data between Facebook and Instagram or its other apps without seeking permission. Amazon is another company targeted by the new act, as it will be barred from using data it collects from sellers on its platform to create products that compete against them.

Alphabet’s Google also finds itself at a crossroads with the EU regulators as it will be barred from favoring its own search verticals like shopping in its search results. Microsoft has sought to defend itself from the new act, insisting that its search engine, Bing, is too small compared to Google and thus should be exempted.

Antitrust Pressure

The new rules should pile antitrust pressure on US tech giants that have had to pay billions of dollars in the past in fines and tax orders from the watchdog. The EU antitrust body insists that the new act is necessary to clamp down on the monopolistic plays by the big tech giants. The EU internal market commissioner, Thierry Breton, expects the new act to reign on the tech giants’ economic power and create more choice for consumers while creating new opportunities.

Companies that violate the new DMA act stand to incur fines of as much as 10% of their worldwide annual sales. It could also rise to 20% in the event of continued infringement. The EU commissions could also demand the companies to be broken up in case of systemic violations.

The affected companies have six months to fall in line and ensure their products and services abide by the new rules. Companies that feel aggrieved have a right to challenge the new regulations in court. The EU antitrust body expects the tech giants to go to court, as has been the case in the past.

Big technology companies have dominated the digital economy over the years owing to their ability to challenge any form of government oversight. Despite facing the risk of billions of dollars in fines, the companies have continued to propagate their monopolistic behavior, something that allows them to generate billions of dollars in revenues and earnings.

(Reuters) – AT&T’s CEO said on Wednesday tests conducted at several sites where the telecom operator abandoned lead-clad cables decades ago have shown no risks of a public health crisis.

The company and Verizon have faced questions about the cables since the Wall Street Journal reported in July that the telecom firms left behind a network of underground toxic lead cables which might have contaminated water and soil.

“I said early on in this and I’ll still say today, we don’t believe that there’s a public health crisis right now,” AT&T CEO John Stankey said at the Goldman Sachs Communacopia + Technology Conference.

The tests, conducted by the likes of the U.S. Environmental Protection Agency and the state of New York, at some of the sites mentioned in the Journal article, including Lake Tahoe, have concluded that there was no threat to public health, he said.

“We’ll make adjustments if something suggests that we need to make an adjustment,” he said, adding the company was working with regulators on the cables.

AT&T shares were trading 1.8% higher, bucking broader market weakness.

The company has previously said that the lead cables made up only a small part of its wireline network.

(Reporting by Samrhitha Arunasalam in Bengaluru; Editing by Devika Syamnath)

WASHINGTON (Reuters) – U.S. Senate Republican leader Mitch McConnell said on Wednesday he will finish his term as party leader and his term as senator following two recent episodes of seemingly freezing up during public remarks.

McConnell told reporters he does not have anything to add to the report by the congressional physician report on his health, which found no evidence that he had suffered a stroke or seizure.

(Reporting by Makini Brice and Katharine Jackson; editing by Dan Whitcomb)

By Lefteris Papadimas and Stamos Prousalis

ATHENS (Reuters) – At least three people died and four were missing on Wednesday after torrential rain flooded homes and businesses and destroyed infrastructure in central Greece, the fire brigade said.

Since Monday, Storm Daniel has triggered landslides, destroyed a bridge, caused the collapse of power poles and carried away dozens of cars in muddy waters, days after a two-week deadly wildfire died out in the north.

The body of an elderly woman was recovered close to a seaside community in the southern Pelion area near the port city of Volos on the Pagasetic Gulf on Wednesday, the fire brigade said. It later said that a man was hit by a vehicle in the area of Karditsa, raising the death toll from severe weather in Greece to three.

On Tuesday, a man died after a wall collapsed in bad weather in Volos and about 94 residents were moved to safety after torrential rain damaged part of their nursing home.

A Reuters journalist said that an overflowing river near the nursing home swallowed the road and flooded a train station in Volos.

Authorities were looking for four missing people, Climate Crisis and Civil Protection Minister Vassilis Kikilias said in a televised news conference.

Some 10 people were trapped on the banks of a torrent in southern Pelion, Michalis Mitzikos, a local mayor, told Skai television.

British travel company Jet2 (JET2.L) said on Wednesday it was cancelling all flights and holidays to the Aegean island of Skiathos, the closest to Volos, up to Sept. 12 due to the weather. The company had already cancelled six flights earlier this week.

Greece has said the weather was the most extreme, in terms of rainfall, since records have been kept.

“Yesterday the rainfall was very intense, unprecedented,” said Vasilis Batsios, 44, in Volos. “For 24 hours it was nonstop and there was a lot of water, the amount of water was unbelievable.”

The volume of water that fell in Pelion on Tuesday was equal to annual rainfall in London, meteorologist George Tsatrafyllias said on platform X, formerly known as Twitter.

Police on Wednesday issued traffic warnings for the cities of Trikala and Karditsa as the rainstorm was not expected to weaken before Thursday.

Some 158 vehicles and hundreds of emergency crews have been operating in other areas hit by downpours across Greece to help people at risk or with health issues, Kikilias said.

Flash floods in Greece in 2017 killed 25 people and left hundreds homeless.

In northwest Turkey, at least five people were killed after heavy rains triggered flash floods, Turkish state broadcaster TRT Haber.

(Additional reporting by Angeliki Koutantou, Renee Maltezou and Kylie MacLellan; Editing by William Maclean and Nick Macfie)

SOFIA (Reuters) – Two bodies more were recovered in Bulgaria’s Black Sea coastal area on Wednesday, bringing to four the death toll from floods triggered by torrential rains, Bulgarian News Agency BTA reported.

The bodies of a local judge, her daughter — a veterinarian –, and a man were found in a submerged car that was washed away from a bridge into the sea when the river overflowed, regional police chief Emil Pavlov told journalists in Tsarevo.

The fourth victim was a man who was also swept away as he was attempting to cross the same bridge on foot, Pavlov said.

It was not immediately clear whose bodies were recovered on Wednesday.

A state of emergency was declared in Tsarevo municipality on Tuesday.

At a nearby Black Sea tourist resort on Arapya beach, cars and caravans were washed away by torrential rain and strong winds.

“For about 20 hours, it was pouring rain with a headwind, non stop – that was the reason why the river overflowed and caused all this damage. It swept cars and car trailers into the sea,” local resident Doctor Plamen Petrov told Reuters TV.

(Reporting by Stoyan Nenov in Sofia and Ivana Sekularac in Belgrade; Editing by Sandra Maler)

MEXICO CITY (Reuters) – Tesla is eyeing 2026 or 2027 to potentially begin production at a major new factory planned for Mexico, according to a report published in Mexican daily Reforma on Wednesday.

The report cited an anonymous Chinese supplier saying that they and several other Chinese companies may delay plans to launch operations near the still un-built Tesla factory, set for the northern state of Nuevo Leon, after learning of Tesla’s slower-than-expected plans.

“Two or three months ago there was a lot of rush, lots of pressure to look for a location. But one month later, they told us to wait,” the source told Reforma.

Several sources previously told Reuters that Tesla planned to begin production in Mexico in 2025.

Tesla did not immediately respond to a request for comment on Wednesday.

Tesla announced its plans for Mexico in March, but has not publicly revealed a start date for construction or production.

Nuevo Leon’s economy minister, Ivan Rivas, declined to comment on Tesla’s timeline, saying it was a matter for the company to address.

Reforma also reported that a timeline from Danish engineering consultancy Ramboll, taking into account the permitting process, suggested the site would only be ready for construction in 2027.

Ramboll did not immediately respond to a request for comment.

(Reporting by Daina Beth Solomon and Raul Cortes in Mexico City and Hyunjoo Jin in San Francisco; Writing by Sarah Morland; Editing by Leslie Adler)

By Laura Sanicola

NEW YORK (Reuters) -Oil prices settled higher on Wednesday, reversing early declines as traders anticipated further draws on U.S. crude oil inventory following extended production cuts in Saudi Arabia and Russia.

Brent crude futures settled up 56 cents to $90.60 a barrel while U.S. West Texas Intermediate crude (WTI) futures settled up 85 cents to $87.54. Both benchmarks rose by $1 and then pared gains.

“We have pretty low crude supplies in the U.S., with several weeks of big crude oil draws pushing prices up,” said Bob Yawger, director of energy futures also at Mizuho.

Six analysts polled by Reuters estimated on average that U.S. crude inventories fell by about 2.1 million barrels in the week to Sept. 1.

The poll was conducted ahead of reports from the American Petroleum Institute industry group, due at 4:30 p.m. EDT (2030 GMT) on Wednesday, and the U.S. Energy Information Administration, due at 11 a.m. EDT (1500 GMT) on Thursday.

Both sets of data arrive a day later than usual due to Monday’s Labor Day holiday.

On Tuesday, Saudi Arabia and Russia extended voluntary oil supply cuts to year end. The Saudi cuts were by 1 million barrels per day (bpd) while Russia has cut 300,000 bpd. These were on top of the April cut agreed by several OPEC+ producers running to the end of 2024.

Both countries will review market conditions and make monthly decisions on deepening cuts or raising output.

Reflecting near-term supply concerns, front-month Brent futures traded near nine-month highs at $4.13 a barrel above prices in six months. The equivalent spread for U.S. WTI futures was as much as $4.88 a barrel, also near nine-month highs.

Oil prices were down early on rate-hike concerns and investor worries about the economy after data showed the ISM non-manufacturing Purchasing Managers’ Index (PMI) came in at 54.5, compared with expectations of 52.5.

Against a basket of currencies, the dollar rose to a high of 105.00, above the six-month high of 104.90 touched overnight. A stronger dollar can weigh on oil demand by making crude more expensive for holders of other currencies.

Analysts warned that price rises could hit demand when U.S. refineries enter their September-October maintenance period. Potentially higher supply from Iran, Venezuela and Libya could also weigh.

Research company IIR Energy said on Wednesday it expects U.S. oil refiners to increase available refining capacity by 274,000 bpd for the week ending Sept. 8.

(Additional reporting by Paul Carsten in London, Mohi Narayan in New Delhi; Arathy Somasekhar in Houston; Editing by David Evans, Jason Neely, Nick Zieminski, Nick Macfie and David Gregorio)

By Jarrett Renshaw and Nichola Groom

(Reuters) -The U.S. Interior Department on Wednesday will announce the cancellation of oil and gas leases in a federal wildlife refuge that were bought by an Alaska state development agency in the final days of the Trump administration, according to sources briefed on the matter.

The Alaska Industrial Development and Export Authority (AIDEA) was issued seven leases in the Arctic National Wildlife Refuge a day before the inauguration of President Joe Biden, who had pledged to protect the 19.6 million-acre (7.7 million hectares) habitat for polar bears and caribou.

Interior and AIDEA officials were not immediately available for comment.

The action is the latest effort by Biden to rein in oil and gas activities on public lands, part of a broader agenda to combat climate change.

Under Trump, the Interior Department in January 2021 sold leases in ANWR over the objections of environmentalists and indigenous groups. A Republican-passed tax bill in 2017 opened the area to oil and gas leasing and directed Interior to hold two lease sales by December 2024.

The oil and gas industry largely failed to embrace the 2021 lease sale, which generated just $14 million in high bids, mostly from AIDEA.

Months after the first and only ANWR lease sale, Biden’s administration said it would suspend the leases issued pending an environmental review. AIDEA later sued, and a federal judge in Alaska last month dismissed the state agency’s claims, saying the government’s delay in implementing the ANWR leasing program was reasonable.

The two other entities that won leases at the ANWR lease sale withdrew from their holdings in 2022.

For decades, Alaska officials pushed to open up drilling in ANWR to secure jobs and revenues for the state. Alaska Senator Dan Sullivan on Wednesday criticized Interior’s move.

“There is palpable anger and frustration among Alaskans about the Biden administration’s unrelenting assault on our economy and our ability to lawfully access our lands,” the Republican senator said in an emailed statement.

Alaskan oil production has dwindled in the last three decades. The state currently produces less than 500,000 barrels per day of crude oil, down from more than 2 million bpd in 1988, according to government figures.

Environmental groups praised Interior’s decision.

“We commend (Interior) Secretary (Deb) Haaland for canceling unlawfully issued oil-and-gas leases in the Arctic Refuge,” Abigail Dillen, president of environmental group Earthjustice, said in a statement. “Looking ahead, we hope to see the strongest possible protections for the Arctic Refuge and the Western Arctic in the years to come.”

(Reporting by Jarrett Renshaw in Washington and Nichola Groom in Los Angeles; Editing by Chizu Nomiyama, David Gregorio and Mark Porter)