US Stocks Rise Despite Hot Inflation As Fed Sentiment Remains Unshaken: What's Driving Markets Wednesday?

Zinger Key Points
  • Inflation came in hotter than expected in August at 3.7% year over year, above the predicted 3.6%.
  • Traders remained unfazed, as they have almost factored in rates to remain unchanged at next week's FOMC meeting.

Wall Street edged higher during Wednesday’s midday session, despite the August CPI report showing the annual inflation rate rising to 3.7%, above the predicted 3.6%.

The unexpected uptick, also coupled with a monthly core inflation exceeding expectations (0.3% vs. 0.2%), did not lead to significant disruptions in the interest rate landscape.

The increase, primarily driven by a rise in energy prices, was perceived by the market as something the Fed is likely to look through. Consequently, expectations have remained unchanged, with traders now almost certainly pricing in a hold on rates at the FOMC meeting next week, while uncertainties linger regarding the November decision.

On a weaker note, Apple Inc. AAPL continued to trade in the red. Investors are exercising caution amidst concerns of a potential iPhone ban in China, compounded by a lackluster reception for Apple’s Tuesday iPhone launch event.

Cues From Wednesday’s Trading

All major U.S. stock indices traded in the green, excluding small caps in the Russell 2000 index.

The tech-heavy Nasdaq 100 outperformed, up 0.6%, while the S&P 500 edged 0.3% higher and the Dow gained 0.2%.

US Index Performance On Wednesday

Index Performance (+/-)Value
Nasdaq 100+0.64%15,386.77
S&P 500 Index+0.33%4,477.31
Dow Industrials+0.18%34,713.49
Russell 2000-0.40%1,847.99

Wednesday’s Trading In Major US Equity ETFs

  • The SPDR S&P 500 ETF Trust SPY was 0.3% higher to $447.45.
  • The SPDR Dow Jones Industrial Average ETF DIA rose 0.2% to $347.83.
  • The Invesco QQQ Trust QQQ gained 0.55% to $375.26, according to Benzinga Pro data.

Looking at S&P 500 sectors:

  • The Utilities Select Sector SPDR Fund XLU led gains, up 1.2%. The Technology Select Sector SPDR Fund XLK was up 0.7% for the day.
  • The Energy Select Sector SPDR Fund XLE was the worst-performing sector, down 0.9%.

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Latest Economic Data:

According to data from the Mortgage Bankers Association, mortgage applications declined by 0.8% in the week ending Sept. 8, marking a new low since December 1996, following a 2.9% decrease in the preceding week.

The average contract interest rate for 30-year fixed-rate mortgages increased by 6 basis points to 7.27%. This rate remained near the August peak of 7.31%, which marked the highest level since December 2000.

The Bureau of Labor Statistics reported that year-over-year headline consumer inflation increased to 3.7%, up from July’s 3.2%, and above the 3.6% estimate. Monthly inflation advanced at 0.6%, as expected, substantially stronger than the 0.2% seen in July.

Core inflation, which excludes energy and food, met expectations, dropping from 4.7% to 4.3% year-on-year. However, on a monthly basis, core inflation accelerated, growing at a rate of 0.3%, surpassing both the previous and anticipated 0.2% increase.

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Stocks In Focus:

Ford Motor Co. F and General Motors Corp. GM rose over 2% and 1%, respectively, in premarket trading on hopes of a resolution to the standoff with the UAW. The company may also be gathering momentum in the wake of the Detroit Auto Show that is underway.

Netflix, Inc. NFLX tumbled 4.3%, marking the worst performance among Nasdaq 100’s stocks.

Moderna Inc. MRNA rose nearly 3% after the company announced that its flu vaccine, mRNA-1010, met its primary endpoint in a late-stage trial.

Rocket Pharmaceuticals RCKT skyrocketed 40% on the day, as the company announced it reached an agreement with the Food and Drug Administration regarding the design of its Phase 2 trial for RP-A501, intended for the treatment of Danon Disease.

Waters Corp. WAT rose over 4% after the company unveiled innovative bioprocess walk-up solutions aimed at streamlining the process of biologic sample preparation and analysis.

Cracker Barrel Old Country Store, Inc. CBRL is due to report its quarterly results ahead of the market open, while Semtech Corp. SMTC will report after the market close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil held steady for the day, with a barrel of WTI-grade crude trading at $88. The United States Oil Fund ETF USO was 0.2% lower to $79.55.  

Treasury yields were slightly lower, with the 10-year yield down by 4 basis points to 4.25% and the two-year yield down by 4 basis points to 4.98%. The iShares 20+ Year Treasury Bond ETF TLT was 0.2% higher for the day. 

The dollar rose, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.2%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.2% lower to 1.0740.

European equity indices had a negative session. The SPDR DJ Euro STOXX 50 ETF  FEZ fell 0.4%. 

Gold edged 0.1% down to $1,909/oz, while silver fell 0.6% to $22.82. Bitcoin BTC/USD was 1.8% higher to $26,314.

Staff writer Piero Cingari updated this report midday Wednesday. 

Read Next:  Peter Schiff Says Fed May Have ‘Secretly Given Up’ 2% Inflation Target: ‘New Unspoken Mandate Will Be …’

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