Stocks Wipe Out CPI-Fueled Slide as Big Tech Jumps: Markets Wrap #NewsUnitedStates

(Bloomberg) — A rally in the world’s largest technology companies spurred a stock-market rebound in a volatile session that had Wall Street traders digesting faster-than-anticipated inflation data.

Most Read from Bloomberg

It was the first time since October 2022 that the S&P 500 and Nasdaq 100 each erased an intraday loss of at least 1.5%. Chipmakers led gains on Wednesday, with Nvidia Corp. up 6.5%. 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 Fed reduction next week.

Crypto, Prison Stocks Slide, Renewables Gain After US Debate

“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 added 0.5%. The Nasdaq 100 climbed 1.5%. The Dow Jones Industrial Average was little changed. The Russell 2000 Index of smaller companies fluctuated. The KBW Bank Index fell 0.7%.

Treasury 10-year yields advanced one basis point to 3.65%. 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.”

Story continues

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:

• 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.

• GameStop Corp. tumbled after the video-game retailer reported sales that came below consensus estimates.

• Petco Health & Wellness Co. jumped after the pet supply and services company’s outlook signaled turnaround progress.

• 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:

• Japan PPI, Thursday

• ECB rate decision, Thursday

• US initial jobless claims, PPI, Thursday

• Eurozone industrial production, Friday

• Japan industrial production, Friday

• U. Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5% as of 2:57 p.m. New York time

• The Nasdaq 100 rose 1.5%

• The Dow Jones Industrial Average was little changed

• The MSCI World Index rose 0.4%

• The Russell 2000 Index was little changed

• KBW Bank Index fell 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro was little changed at $1.1019

• The British pound fell 0.3% to $1.3046

• The Japanese yen rose 0.2% to 142.22 per dollar

Cryptocurrencies

• Bitcoin fell 0.2% to $57,481.58

• Ether fell 1.7% to $2,337.48

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.65%

• Germany’s 10-year yield declined two basis points to 2.11%

• Britain’s 10-year yield declined six basis points to 3.76%

Commodities

• West Texas Intermediate crude rose 2.2% to $67.22 a barrel

• Spot gold fell 0.2% to $2,511.91 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Lu Wang.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.