U.S. Stocks Begin Trading with Gains Following a Higher-Than-Anticipated August Inflation Report

In the morning of Wednesday, U.S. stock indexes saw an increase as the most recent consumer-price index data revealed a rise in inflation during August. This development has the potential to alter predictions regarding the Federal Reserve’s interest-rate strategy.

How are stock indexes trading

  • The S&P 500 index, also known as SPX, increased by 6 points or 0.2% and reached a value of 4,468.
  • The Dow Jones Industrial Average, also known as DJIA, increased by 19 points or 0.1%, reaching a value of 34,662.
  • The Nasdaq Composite index increased by 42 points, equivalent to a 0.3% rise, reaching a value of 13,816.

The Dow industrials dropped by 18 points, or 0.05%, to reach 34,646 on Tuesday. At the same time, the S&P 500 saw a decline of 0.6%, settling at 4,462, while the Nasdaq experienced a drop of 1.04%.

The U.S. stock indexes rose on Wednesday after the release of the U.S. consumer-price index for August. The index showed that annual headline inflation increased by 3.7% last month, slightly higher than what Wall Street had predicted (3.6%). The consumer-price index, which measures the cost of various goods and services, had a significant monthly increase of 0.6%, the highest in 14 months. However, when excluding the prices of energy and food, the core inflation still rose by a larger amount (0.3%) than expected (0.2%).

Nigel Green from deVere Group, a financial advisor and asset management firm, stated that the latest U.S. CPI data is unlikely to have a significant impact on the Federal Reserve’s decision to keep rates steady at their meeting next week. This decision has already been factored into by financial markets. However, the increase in inflation provides an additional reason for the U.S. central bank to be more cautious moving forward. Therefore, it is also expected that the Fed will begin preparing the market for a rate hike at its November meeting.

According to the CME Fed Watch Tool, traders in the market for fed funds futures maintain a high level of confidence, with a 95% probability that the Federal Reserve will not raise interest rates in their upcoming policy meeting next week. Similarly, there is a 37% chance of a 25 basis point increase in rates at the November meeting, which has remained relatively steady compared to the previous day.

In English, the interest rate for the 10-year Treasury note BX:TMUBMUSD10Y increased by 1 basis point to 4.279%, while the interest rate for the 2-year Treasury BX:TMUBMUSD02Y decreased by 3 basis points to 4.999%.

According to Chris Zaccarelli, the chief investment officer at Independent Advisor Alliance, the report released on Wednesday was not as favorable as expected because the core inflation rate increased by only 0.3% monthly. He mentioned that this result did not meet investors’ expectations, but it still allows the market to maintain a stable range. Zaccarelli also remarked that although inflation is at a level that keeps the Federal Reserve involved, it is not significant enough for a complete shift away from the belief that the Federal Reserve’s actions are almost finished. He conveyed these thoughts through comments sent by email.

According to Zaccarelli, if the economy remains strong and inflation doesn’t become a concern again, the stock market has the potential for a rally until the end of the year, particularly after the historically slow months of September and October.

Investors will be paying attention to ARM Holding’s anticipated pricing later in the day for its initial public offering. This could potentially value the chip designer at a maximum of $55 billion. If the U.K-based company’s IPO is successful, it may ignite activity in the IPO market. A thriving IPO market is typically indicative of a generally optimistic stock market.

The federal budget report for August, scheduled for release at 2 p.m., is among the other U.S. economic updates expected on Wednesday.

Companies in focus

  • Shares of Nio and Li Auto experienced decreases of 3% and 0.8%, respectively, on Wednesday following an announcement from the European Union about their investigation into Chinese government subsidies provided to electric vehicle manufacturers.
  • The stocks of Apple, symbolized as AAPL, declined by 0.67% as its shares fell by 0.3%. A representative from the Chinese government refuted any claims of a prohibition on foreign phones, but acknowledged the occurrence of “security incidents” related to the iPhone.
  • Shares of Spirit Airlines Inc., ticker symbol SAVE, dropped by 1.4% on Wednesday in response to the budget airline’s revised third-quarter outlook. The revision was made due to the company’s intensified promotion efforts for travel in the latter part of the year and the recent surge in fuel costs.

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