(Bloomberg) — A rally in the world’s largest technology companies spurred a stock-market rebound in a volatile session that had traders digesting faster-than-anticipated inflation data.
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The S&P 500 wiped out losses after a slide that topped 1.5% earlier Wednesday. The Nasdaq 100 rose 1.5%. Nvidia Corp. climbed 6.5% to lead gains in chipmakers. Financial, energy and industrial shares underperformed. Treasury yields edged up on bets the Federal Reserve will move gradually with rate cuts. Swap traders have fully priced in a quarter-point reduction at the Fed’s policy announcement next week.
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“While we’ve seen a slight pullback in stocks as of late with choppy earnings and economic data, we would expect more smooth sailing post this initial Fed rate cut and post-election, as uncertainty fades and investors start to price-in 2025 earnings,” said Skyler Weinand at Regan Capital.
While stocks bounced back, sentiment remained “cagey,” according to Fawad Razaqzada at City Index and Forex.com.
“Concerns over a weakening global economy have derailed stocks this month,” he noted. “There is also the added risk of the presidential elections. Investors appear hesitant to chase the rallies and we could see the recovery falter again later in the week.”
The S&P 500 hovered bear 5,530. The Dow Jones Industrial Average was little changed. The Russell 2000 Index of smaller companies rose 0.1%. The KBW Bank Index fell 0.7%.
Treasury 10-year yields advanced two basis points to 3.66%. The dollar fell. Oil climbed as Hurricane Francine ripped through key oil-producing zones in the US Gulf of Mexico, prompting traders to cover bearish bets.
The so-called core consumer price index — which excludes food and energy costs — increased 0.3% from July, the most in four months, and 3.2% from a year ago, Bureau of Labor Statistics figures showed Wednesday. The three-month annualized rate advanced 2.1%, picking up from 1.6% in July, according to Bloomberg calculations.
“The firmer-than-expected core inflation print will make it harder for Jerome Powell to deliver a 50 basis-point cut in September,” said Krishna Guha at Evercore. “We continue to think a starter 50 basis-point cut is the right play and might even now win out. But the odds have moved against this, and risks to markets and the soft landing are higher as a result.”
Guha noted that if the Fed doesn’t cut rates by 50 basis points next week, it will possibly do that in November.
“Going forward, the risks are clearly weighted toward slowing growth and a deteriorating labor market, and that’s why there are still four 25 bps cuts priced in with only three meetings left in the year,” said Chris Zaccarelli at Independent Advisor Alliance. “If the economy continues to slow – and not drop into an abrupt recession – the Fed will be able to cut at a measured, 25 basis-point per meeting pace.”
To David Russell at TradeStation, while the latest inflation numbers aren’t “runaway dovish,” they confirm the cooling process remains in effect. Attention could now shift from the Fed as a catalyst toward earnings and the election cycle, he noted.
“This isn’t the CPI report the market wanted to see,” said Seema Shah at Principal Asset Management. “The number is certainly not an obstacle to policy action next week, but the hawks on the committee will likely seize on today’s CPI report as evidence that the last mile of inflation needs to be handled with care and caution.”
Corporate Highlights:
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Children’s Place Inc. soared after the apparel retailer reported an adjusted profit for the second quarter, while Wall Street had been projecting a loss.
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GameStop Corp. tumbled after the video-game retailer reported sales that came below consensus estimates.
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Petco Health & Wellness Co. jumped after the pet supply and services company’s outlook signaled turnaround progress.
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Roche Holding AG’s shares slid after its closely-watched experimental obesity pill was tied to side effects, including nausea and vomiting, in a small study.
Key events this week:
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Japan PPI, Thursday
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ECB rate decision, Thursday
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US initial jobless claims, PPI, Thursday
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Eurozone industrial production, Friday
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Japan industrial production, Friday
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U. Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.6% as of 2:40 p.m. New York time
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The Nasdaq 100 rose 1.5%
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The Dow Jones Industrial Average was little changed
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The MSCI World Index rose 0.4%
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Bloomberg Magnificent 7 Total Return Index rose 1.6%
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The Russell 2000 Index rose 0.1%
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KBW Bank Index fell 0.7%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro was little changed at $1.1021
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The British pound fell 0.2% to $1.3048
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The Japanese yen rose 0.1% to 142.23 per dollar
Cryptocurrencies
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Bitcoin rose 0.4% to $57,817.51
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Ether fell 1.3% to $2,346.33
Bonds
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The yield on 10-year Treasuries advanced two basis points to 3.66%
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Germany’s 10-year yield declined two basis points to 2.11%
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Britain’s 10-year yield declined six basis points to 3.76%
Commodities
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West Texas Intermediate crude rose 2.5% to $67.38 a barrel
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Spot gold fell 0.2% to $2,512.72 an ounce
This story was produced with the assistance of Bloomberg Automation.
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