Stock market today: Indexes rise as stocks whipsaw after inflation-fueled decline
US stocks traded mixed on Wednesday, with investors staging a recovery after taking in a mixed inflation report.
Major indexes pared their losses to end the day mostly flat, while bond yields moved higher. The Dow Jones Industrial Average was down as much as 600 points earlier in the day before reversing course to end with a slight gain.
Traders were rattled after core consumer prices came in hotter-than-expected in the month of August, causing markets to take bets for a 50 basis point rate cut this month off the table.
Markets are now pricing in an 85% chance the Fed will cut rates just a quarter-point at their policy meeting next week. Odds for a 50 basis-point cut have been slashed by more than half to just 15%, according to the CME FedWatch tool.
“The Fed will see the CPI report as another pebble on the scale for a quarter percentage point rate cut at next week’s decision,” Bill Adams, chief economist at Comercia Bank, said in a note. “The stickiness of service-price inflation makes the Fed likely to cut rates slower than financial markets currently assume,” he later added.
“It is too early to declare victory on inflation: current levels of housing inflation are not consistent with the Fed’s 2% core PCE inflation mandate,” Bank of America strategists said in a note, reiterating their prediction for a 25 basis-point rate cut in September. “As long as a soft landing remains in play, we think that the Fed cannot take its eye off the ball on inflation.”
Investors will be tuned into other economic data points this week, which could also serve as input ahead of the Fed’s policy decision on September 18. Markets will assess August producer price inflation data and weekly jobless claims on Thursday and fresh retail sales data next Tuesday.
Tech shares were led higher by Nvidia, which jumped more than 8% as CEO Jensen Huang looked to assuage investors’ concerns about how its customers were seeing a return on their massive AI investments. The executive addressed questions at an event hosted by Goldman Sachs on Wednesday.
Here’s where US indexes stood at the 4 p.m. closing bell on Wednesday:
- S&P 500: 5,554.11, up 1.07%
- Dow Jones Industrial Average: 40,861.71, up 0.31% (+124.75 points)
- Nasdaq composite: 17,395.53, up 2.17%
Here’s what else is going on:
- Nvidia stock jumped after CEO Jensen Huang looked to address key investor concerns.
- The market is acting like Harris won the presidential debate last night.
- The AI theme in stocks is “overcooked,” according to Morgan Stanley’s CIO.
- This corner of the stock market is bound to outperform once the Fed starts cutting rates, according to Goldman Sachs.
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil rose 2% to $67.07 a barrel. Brent crude, the international benchmark, rose 1.7% to $70.40 a barrel.
- Gold was lower by 0.25% to $2,510.16 an ounce.
- The 10-year Treasury yield ticked higher one basis point to 3.655%.
- Bitcoin fell 0.6% to $57,574.
