Wall St staggers to a higher close as Fed rate hike looms

Wall St staggers to a higher close as Fed rate hike looms

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  • Market sees 22% chance of a 100bp rate hike from the Fed -CME
  • Railroad stocks fall amid talks to avoid strike
  • Indices up: Dow 0.10%, S&P 0.34%, Nasdaq 0.74%

NEW YORK, Sept 14 (Reuters) – Wall Street closed a directionless session higher on Wednesday as an on-target inflation report largely halted the flow of Tuesday’s sell-off and that investors pressed the “pause” button.

All three indices oscillated throughout the day, but eventually ended in positive territory. They all failed to significantly recoup the ground lost in Tuesday’s carnage, which caused their biggest percentage drop in more than two years.

“Today is a band-aid day, after taking some body shots yesterday,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. “It’s a day of rest and it’s kind of a sign of welcome.”

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The Labor Department’s producer price (PPI) data came closer to consensus estimates and provided some relief following Tuesday’s CPI print, which came in warmer than expected. Read more

“The inflation debate continues and yesterday was a stark reminder to us that this is an uphill battle and that the Fed needs to remain aggressive to rein in the widespread inflationary prices we are seeing,” Detrick added.

The PPI report provided reassurance that inflation is indeed on a slow, downward path.

Inflation

But it still has a long way to go before approaching the Federal Reserve’s average annual inflation target of 2%, and with financial markets fully priced in an interest rate hike of at least 75 basis points at the end of next week’s FOMC policy meeting, they see a 22% chance of an oversized 100 basis point increase, according to CME’s FedWatch tool.

Two-year US Treasury yields, which reflect interest rate expectations, extended Tuesday’s rise.

The magnitude and duration of further interest rate hikes in the future have many market watchers worried about the lagging effects of the Fed’s tightening phase, with some viewing a recession as inevitable.

A trader works on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., September 13, 2022. REUTERS/Andrew Kelly

The transportation sector (.DJT), seen as a barometer of economic health and providing insight into the supply side of inflation, was weighed down by rail stocks in the face of a possible strike.

“Does the White House really want the rails to stop and further impact supply chains, less than two months before the midterm elections?” Detrick asked. “We’re optimistic they can keep the tracks open.”

Rail operators Union Pacific (UNP.N), Norfolk Southern (NSC.N) and CSX Corp (CSX.O) lost 3.7%, 2.2% and 1.0% respectively, even as the Secretary to the Labor Marty Walsh met with union representatives in Washington during talks. aimed at preventing a stoppage of the rail. Read more

The Dow Jones Industrial Average (.DJI) rose 30.12 points, or 0.1%, to 31,135.09, the S&P 500 (.SPX) gained 13.32 points, or 0.34%, to 3,946.01 and the Nasdaq Composite (.IXIC) added 86.10 points, or 0.74%, to 11,719.68.

Six of the 11 major S&P 500 sectors advanced, with energy stocks (.SPNY) leading the winners with help from rising crude prices due to supply issues.

Shares of Starbucks Corp (SBUX.O) jumped 5.5% after the company raised its three-year earnings and sales outlook. Read more

Tesla Inc (TSLA.O) rebounded from Tuesday’s drop, rising 3.6% on the same day. President Joe Biden announced $900 million in funding for electric vehicle charging stations. Read more

Advancing issues outnumbered declining ones on the NYSE by a ratio of 1.05 to 1; on the Nasdaq, a ratio of 1.06 to 1 favored the decliners.

The 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 U.S. exchanges was 10.90 billion shares, compared to an average of 10.33 billion over the past 20 trading days.

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Reporting by Stephen Culp in New York Additional reporting by Ankika Biswas, Devik Jain and Sruthi Shankar in Bangalore Editing by Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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