(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.
The S&P 500 climbed 1.1% and the Nasdaq 100 rallied 2.2%. It was the first time since October 2022 that each gauge erased an intraday loss of at least 1.5%. Chipmakers led gains, with Nvidia Corp. up 8.2%. Treasury two-year yields rose on speculation the Federal Reserve will move gradually with rate cuts. Traders cemented wagers on a quarter-point Fed reduction next week.
“Stocks bounced back after the initial post-CPI drop as dip-buyers once again stepped in,” said Fawad Razaqzada at City Index and Forex.com. “Still, September has historically been challenging for the stock market, and it could prove to be the case again as we head deeper into the month.”
To Skyler Weinand at Regan Capital, we should expect “more smooth sailing” after an initial Fed cut and post-election as uncertainty fades.
“Stock bulls should favor a slow and controlled vertical walk down the monetary policy stairs rather than a speedy and turbulent roll south to lower stories,” said Jose Torres at Interactive Brokers. “The former case has been consistent with soft landings and earnings buoyancy, while the latter tends to occur during economic slowdowns and profit declines.”
The S&P 500 closed around 5,554. A gauge of the “Magnificent Seven” megacaps jumped 2.6%. The Dow Jones Industrial Average rose 0.3%. The Russell 2000 Index added 0.3%. International Business Machines Corp. hit an all-time high. OpenAI is in talks to raise $6.5 billion from investors at a valuation of $150 billion, according to people familiar with the situation.
Treasury 10-year yields advanced one basis point 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.
“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.”
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.
“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.
Corporate Highlights:
- Children’s Place Inc. soared 86% after the apparel retailer reported an adjusted profit for the second quarter, while Wall Street had been projecting a loss.
- Petco Health & Wellness Co. jumped 33% after the pet supply and services company’s outlook signaled turnaround progress.
- GameStop Corp. tumbled 12% after the video-game retailer reported sales that came below consensus estimates.
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 1.1% as of 4 p.m. New York time
- The Nasdaq 100 rose 2.2%
- The Dow Jones Industrial Average rose 0.3%
- The MSCI World Index rose 0.7%
- The Russell 2000 Index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.1016
- The British pound fell 0.3% to $1.3043
- The Japanese yen was little changed at 142.40 per dollar
Cryptocurrencies
- Bitcoin was little changed at $57,581.74
- Ether fell 1.6% to $2,340.87
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.66%
- 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 2.1% to $67.12 a barrel
- Spot gold fell 0.2% to $2,512.59 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Lu Wang.
©2024 Bloomberg L.P.
