S&P 500 falls slightly as investors await key inflation data

Stocks rose on Wednesday as investors anticipated a key consumer report that will inform the pace of Federal Reserve rate hikes going forward.

Traders took a comment in the minutes of the central bank’s September meeting as a sign that the Fed could reverse rate hikes in the event of further market turbulence, boosting stocks further.

The Dow Jones Industrial Average gained 58 points, or 0.21%. The S&P 500 lost 0.08%, supported by an 8% jump in shares of Modern, the stock that earns the most in the index. The Nasdaq Composite rose 0.01%.

Stocks rose and bond yields fell after the minutes of the Federal Reserve’s September meeting were released in the afternoon. The minutes showed that the central bank expects to keep raising interest rates and keep them high until inflation shows signs of easing.

On the other hand, a comment in the minutes led to optimism that the Fed could slow down its tightening campaign or even roll it back if there were more turbulence in financial markets.

“Several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on economic outlook,” the minutes read. .

Earlier in the day, stocks swung between gains and losses as the September Producer Price Index, an indicator of wholesale final demand prices, turned higher than expected. Printing rose 0.4% in September, more than the consensus estimate of a 0.2% increase, according to Dow Jones.

The PPI number is one of the inflation gauges that investors watch alongside the Federal Reserve. If inflation remains high, the central bank is more likely to continue its aggressive path of interest rate hikes to bring it under control. This means that rates will continue to rise and could stay high for longer than markets expected, which will weigh on equities.

Investors will get even more important inflation data on Thursday. The consumer price index is a measure of the price changes of a basket of common consumer goods and services.

“Prices remain high, so it should come as no surprise to see production goods and services increasing. Keep in mind that the increase is still less than what we consistently saw month-over-month earlier this year,” said Mike Loewengart, head of model portfolio construction. at Morgan Stanley Global Investment Office. “There is no doubt that the Fed still has its work cut out for it, and if tomorrow’s CPI reading is hot, don’t be surprised to see some investors realizing just how far they have to go to get the CPI under control. ‘inflation.”