Wall Street ended a lackluster session higher on Wednesday as a report on target inflation largely halted Tuesday’s sell-off and investors hit the pause button.
All three indexes fluctuated during the day, but ultimately ended in the positive.
All of them failed to significantly recover the ground lost in Tuesday’s carnage, which led to the biggest percentage drop in more than two years.
“Today is a day to lick your wounds after you took a beating yesterday,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. “It’s a rest day, and that’s a good sign to some degree.”
The Labor Department’s producer price (PPI) data came in close to consensus estimates and provided some relief after Tuesday’s hotter-than-expected CPI market report.
“The inflation debate continues, and yesterday was a stark reminder that this is an uphill battle and the Fed must remain aggressive to stem the widespread price inflation we’re seeing,” Detrick added.
The PPI report assured that inflation is indeed on a slow, downward trajectory.
But it still has a long way to go before it approaches the Federal Reserve’s average annual inflation target of 2%, and while financial markets have fully priced in at least a 75-basis-point rate hike at next week’s FOMC policy meeting, the tool CME FedWatch, the chance of a huge 100 basis point increase is 28%.
The yield on the two-year U.S. Treasury note, which reflects expected interest rates, extended gains on Tuesday.
The size and duration of further interest rate hikes in the future has many observers worried about the lingering effects of the Fed’s tightening phase, and some see a recession as imminent.
The transport sector, seen as a barometer of economic health and providing a glimpse into the supply side of the inflationary picture, weighed on rail stocks in the face of a potential strike.
“Does the White House really want the rails to close and further impact supply chains less than two months before the midterm elections?” Detrick asked. “We are optimistic that they will be able to keep the rails open.”
Rail operators Union Pacific, Norfolk Southern and CSX Corp lost 3.7%, 2.2% and 1.0%, respectively, even as Labor Secretary Marty Walsh met with union representatives in Washington for talks aimed at averting a rail shutdown.
The Dow Jones industrial average rose 30.12 points, or 0.1%, to 31,135.09, the S&P 500 added 13.32 points, or 0.34%, to 3,946.01 and the Nasdaq Composite added 86, 10 points, or 0.74%, to 11,719.68.
Six of the S&P 500’s 11 major sectors advanced, led by energy stocks as oil prices rose amid supply concerns.
Shares of Starbucks Corp jumped 5.5% after the company raised its three-year profit and sales guidance.
Tesla Inc rebounded from a drop on Tuesday, rising 3.6% on the day President Joe Biden announced $900 million in funding for electric vehicle charging stations.
On the NYSE, advancing issues outnumber declining issues by a ratio of 1.05 to 1; on the Nasdaq, a 1.06-to-1 ratio favored decliners.
S&P 500 posted 2 new 52-week highs and 30 new lows; The Nasdaq Composite recorded 26 new highs and 219 new lows.
Volume on US exchanges was 10.90 billion shares, compared to the 10.33 billion average over the past 20 trading days.
