Nasdaq Shows Strong Upward Move Following Inflation Data But Dow Posts Modest Loss
After failing to sustain an initial move to the upside, stocks fluctuated over the course of the trading session on Wednesday. While the tech-heavy Nasdaq maintained a positive bias throughout the session, the S&P 500 spent the day bouncing back and forth across the unchanged line.
The Nasdaq eventually showed a strong upward move on the day, jumping 126.89 points or 1.0 percent to 12,306.44. The S&P 500 also climbed 18.47 points or 0.5 percent to 4,137.64, while the narrower Dow bucked the uptrend and edged down 30.48 points or 0.1 percent to 33,531.33.
The initial strength on Wall Street partly reflected a positive reaction to the Labor Department’s highly anticipated report on consumer price inflation in the month of April.
The Labor Department said its consumer price index climbed by 0.4 percent in April after inching up by 0.1 percent in March. Economists had expected consumer prices to rise by 0.4 percent.
Excluding food and energy prices, core consumer prices also rose by 0.4 percent in April, matching the increase seen in March as well as economist estimates.
The report also showed the annual rate of consumer price growth edged down to 4.9 percent in April from 5.0 percent in March. Economists had expected the year-over-year growth to be unchanged.
The annual rate of core consumer price growth also slipped to 5.5 percent in April from 5.6 percent in March. The modest slowdown matched economist estimates.
With the annual consumer price growth marking the smallest 12-month increase since April 2021, the data added to optimism about the Federal Reserve pausing its interest rate hikes.
CME Group’s FedWatch Tool is currently indicating a 99.1 percent chance the Federal Reserve will leave interest rates unchanged at its next meeting in June.
Buying interest was somewhat subdued, however, as traders worry the slowdown in the pace of price growth is partly due to the U.S. heading for a recession.
“We expect to receive more encouraging news on the inflation front as the economy cools though we won’t reach the Fed’s 2% inflation target for quite some time,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.
He added, “A positive consequence of the oncoming mild recession that we expect in H2 2023 is it should help ease price pressures.”
Sector News
Software stocks turned in a strong performance on the day, resulting in a 1.7 percent jump by the Dow Jones U.S. Software Index. With the gain, the index reached its best closing level in over a year.
Semiconductor and biotechnology stocks also saw notable strength, contributing to the advance by the tech-heavy Nasdaq.
On the other hand, steel stocks saw considerable weakness amid concerns about global demand, dragging the NYSE Arca Steel Index down by 1.4 percent.
Significant weakness also emerged among banking stocks, as reflected by the 1.3 percent drop by the KBW Bank Index.
Oil service stocks also moved to the downside, with a steep drop by the price of oil weighing on the sector following the release of a report showing an unexpected weekly increase in U.S. crude oil inventories.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index fell by 0.4 percent, while China’s Shanghai Composite Index slumped by 1.2 percent.
The major European markets also moved to the downside on the day. While the French CAC 40 Index slid by 0.5 percent, the German DAX Index declined by 0.4 and the U.K.’s FTSE 100 Index dipped by 0.3 percent.
In the bond market, treasuries have moved notably higher after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 7.1 basis points at 3.450 percent.
Looking Ahead
Trading on Thursday may be impacted by reaction to separate Labor Department reports on producer price inflation and weekly jobless claims.
On the earnings front, entertainment giant Disney (DIS) is among the companies releasing their quarterly results after the close of today’s trading.
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