S&P 500, Nasdaq gain, Treasury yields dip as data firms Fed pause bets

Everything was up most of the day, the Dow up a hundred points in the morning, then all came crashing down rather abruptly around 2:30 p.m.  It was likely right around that time that the CPI data was announced showing that, though Core CPI (which excludes energy and food) was down ever so slightly, total CPI was up at its fastest pace in 14 months from surging energy prices. What was a very good day overall until the last hour turned into a very middling day with the Nasdaq and S&P up modestly, the Dow down modestly, and tech only warmed up because of the now 97% chance that rates will remain paused. See below for a chart of 5 inflation gauges and where they stand today.  Volume came in at 10 billion shares traded. 

S&P 500, Nasdaq gain, Treasury yields dip as data firms Fed pause bets

By Stephen Culp

Wed September 13, 2023 4:22 PM

DJ: 34,645.99  -17.73       NAS: 13,773.61  -144.28        S&P: 4,461.90  -25.56      9/12

DJ: 34,575.33  -70.46       NAS: 13,813.58  +39.97         S&P: 4,467.44  +5.54       9/13

NEW YORK, Sept 13 (Reuters) - Wall Street closed mixed on Wednesday, and U.S. Treasuries oscillated within a tight range after data showed underlying inflation remained on its slow, downward trajectory, cementing the likelihood that the Federal Reserve will let interest rates stand for now.  The S&P 500 gained modestly and interest-rate sensitive mega caps, led by Amazon.com (AMZN.O) and Microsoft Corp (MSFT.O), gave the tech-heavy Nasdaq the edge.  The blue-chip Dow Jones Industrial Average ended modestly lower.

U.S. consumer price (CPI) data showed prices heated up in August at their fastest pace in 14 months due to rising energy prices, but the "core" measure, which excludes volatile food and energy items, remained on its meandering path down toward the Federal Reserve's average 2% annual inflation target.  "Since markets were weak the last few days, maybe people were fearing more core inflation than we saw," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. The report "confirms the idea of the Fed waiting to see what further data show before a possibly hiking rates in November."

Tuz noted that "CPI was slightly positive on a core basis, but surging gasoline prices affect retail sales." He explained that "The extra $20 you spend filling your tank is $20 less you spend on other things."

Financial markets have priced in a 97% likelihood of the Federal Reserve standing pat at next week's monetary policy meeting, leaving the key Fed funds target rate at 5.25%-5.50%, according to CME's FedWatch tool. 

    Inflation

 

The Dow Jones Industrial Average (.DJI) fell 70.1 points, or 0.2%, to 34,575.89, the S&P 500 (.SPX) gained 5.59 points, or 0.13%, to 4,467.49 and the Nasdaq Composite (.IXIC) added 39.96 points, or 0.29%, to 13,813.59. 

U.S. Treasury yields inched lower in the wake of the CPI report, which suggested the Fed will keep interest rates steady at its upcoming meeting.  Benchmark 10-year notes last rose 3/32 in price to yield 4.2544%, from 4.264% late on Tuesday.

Oil prices dipped as a surprise U.S. inventory build helped market participants look past expectations of tight supply.  U.S. crude slipped 0.36% to settle at $88.52 per barrel, while Brent settled at $91.88 per barrel, down 0.2% on the day. 

Per the CBOE, volume came in at 10 billion.