US stocks finished up on Wednesday after an indecisive day as the major averages drifted from one side of the flatline back to the other.
At the end of trading the S&P 500 rose 0.3%, the DOW rose 0.1%, and the Nasdaq was up by 0.7%.
The quiet trading day was a respite after Tuesday’s rout of all the major averages, where the Nasdaq dropped more than 5% after a hotter than expected August inflation report made a 75 basis point hike by the Fed at the next meeting all but certain.
The August CPI showed a 0.1% increase in consumer prices over the prior month and an 8.3% increase year over year, beating analyst expectations.
Keith Lerner, chief market strategist at Truist Advisory Services wrote in a note, “This CPI report put cold water on a building market narrative that a potential easing in inflation data could provide the Federal Reserve (Fed) cover to ease up on its aggressive tightening campaign. This report will keep the Fed squarely focused on enemy number one – inflation. Indeed, earlier this year, Fed Chair Powell said the current backdrop is ‘not a time for tremendously nuanced readings of inflation,’ and the Fed will keep tightening policy until inflation comes down in ‘a convincing way.'”
Wednesday morning, investors had priced in a roughly 30% chance of a 100 basis point hike at the next FOMC meeting, as inflationary pressures appeared to be entrenching.
Investors are increasingly harkening back to the statement recently by Fed Chair Jerome Powell that the Fed intends to raise interest rates, “until the job is done,” and inflation returns to the Fed’s 2% target rate.
Core inflation, which excludes volatile food and energy, and is the Fed’s preferred method of measuring price increases in the economy, rose 6.3% year over year.
WTI crude rose more than 2.5%, to over $89.60 per barrel, as oil prices rose roughly $7 per barrel over the previous week after dangling near year to date lows earlier in the month.
Bitcoin fell roughly 10% to below $20,000 as investors focused on the pending “Merge” upgrade in Ethereum.
Twitter was one of only five stocks in the S&P 500 to rise in price on Tuesday, as the company’s shareholders reaffirmed their commitment to following through on Elon Musk’s potential $44 billion takeover of the company. By Wednesday afternoon, Twitter was down roughly 0.8%.
