U.S. Stocks Move Mostly Higher Following Early Volatility

After showing a lack of direction early in the session, stocks have moved mostly higher over the course of the trading day on Wednesday. The major averages are hovering in positive territory after bouncing back and forth across the unchanged line in early trading.

The tech-heavy Nasdaq reached a new high for the session in recent trading and is currently up 89.37 points or 0.7 percent at 13,862.98. The S&P 500 is also up 16.01 points or 0.4 percent at 4,477.91, while the Dow is posting a more modest gain, up 29.74 points or 0.1 percent at 34,675.73.

The strength that has emerged on Wall Street comes following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of August.

The report said the consumer price index climbed by 0.6 percent in August after inching up by 0.2 percent in July. The price growth matched expectations.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in August after edging up by 0.2 percent in July. Economists had expected another 0.2 percent uptick.

The Labor Department also said the annual rate of consumer price growth accelerated to 3.7 percent in August from 3.2 percent in July. The annual rate of growth was expected to accelerate to 3.6 percent.

Meanwhile, the report said the annual rate of growth by core consumer prices slowed to 4.3 percent in August from 4.7 percent in July, in line with economist estimates.

The data has reinforced expectations the Federal Reserve will leave interest rates unchanged next week, with a downturn by treasury yields contributing to the advance on Wall Street.

However, many economists feel the slightly bigger than expected monthly increase in core prices leaves the door open for another rate hike before the end of the year.

“We expect Fed officials to look past the rise in headline CPI, but the uptick in the core CPI is reminder that the risks remain tilted toward additional rate hikes,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

Following the report, CME Group’s FedWatch Tool is indicating a 97.0 percent chance the Federal Reserve will leave interest rates unchanged next week.

The outlook for November remains more mixed, however, with the FedWatch Tool indicating a 58.0 percent chance rates will remain unchanged and a 40.8 percent chance of another quarter point rate hike.

Sector News

Interest rate-sensitive utilities stocks have shown a strong move to the upside over the course of the session, driving the Dow Jones Utility Average up by 1.4 percent.

Significant strength has also emerged among semiconductor stocks, as reflected by the 1.4 percent gain being posted by the Philadelphia Semiconductor Index.

Software stocks have also moved notably higher after coming under pressure on Tuesday, with the Dow Jones U.S. Software Index climbing by 1.1 percent.

On the other hand, oil service stocks continue to see substantial weakness, dragging the Philadelphia Oil Service Index down by 2.3 percent.

The weakness in the sector comes as the price of crude oil for October delivery is falling $0.42 to $88.42 a barrel after reaching ten-month highs earlier in the day.

Airline stocks also continue to see considerable weakness, resulting in a 2.3 percent slump by the NYSE Arca Airline Index. The index is on pace to end the session at a four-month closing low.

America Airlines (AAL) has led the sector lower, plummeting by 5.4 percent after lowering its third quarter earnings guidance due to higher fuel costs and expenses related to a new labor agreement.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index dipped by 0.2 percent, while China’s Shanghai Composite Index slid by 0.5 percent.

The major European markets also moved to the downside on the day. While the U.K.’s FTSE 100 Index closed just below the unchanged, the French CAC 40 Index and the German DAX Index both fell by 0.4 percent.

In the bond market, treasuries have moved modestly higher over the course of the session after seeing initial weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, down by 1.7 basis points at 4.247 percent.

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