U.S. Stocks Turning In Lackluster Performance Following Inflation Data


With traders digesting a highly anticipated report on consumer price inflation, stocks have shown a lack of direction over the course of trading on Wednesday. The major averages have spent the morning bouncing back and forth across the unchanged line.

Currently, the major averages are posting modest gains. The Dow is up 66.10 points or 0.2 percent at 34,712.09, the Nasdaq is up 43.20 points or 0.3 percent at 13,816.81 and the S&P 500 is up 10.86 points or 0.2 percent at 4,472.76.

The choppy trading on Wall Street comes following the release of the Labor Department’s report on consumer price inflation in the month of August.

The report said the consumer price index climbed by 0.6 percent in August after inching up by 0.2 percent in July. The price growth matched expectations.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in August after edging up by 0.2 percent in July. Economists had expected another 0.2 percent uptick.

The Labor Department also said the annual rate of consumer price growth accelerated to 3.7 percent in August from 3.2 percent in July. The annual rate of growth was expected to accelerate to 3.6 percent.

Meanwhile, the report said the annual rate of growth by core consumer prices slowed to 4.3 percent in August from 4.7 percent in July, in line with economist estimates.

While the data has reinforced expectations the Federal Reserve will leave interest rates unchanged, many economists feel the slightly bigger than expected monthly increase in core prices leaves the door open for another rate hike before the end of the year.

“We expect Fed officials to look past the rise in headline CPI, but the uptick in the core CPI is reminder that the risks remain tilted toward additional rate hikes,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

Following the report, CME Group’s FedWatch Tool is indicating a 97.0 percent chance the Federal Reserve will leave interest rates unchanged next week.

The outlook for November remains more mixed, however, with the FedWatch Tool indicating a 61.0 percent chance rates will remain unchanged and a 37.9 percent chance of another quarter point rate hike.

Sector News

Most of the major sectors are showing only modest moves on the day, contributing to the lackluster performance by the broader markets.

Airline stocks have shown a notable move to the downside, however, with the NYSE Arca Airline Index falling by 1.5 percent.

America Airlines (AAL) has led the sector lower, tumbling by 4.1 percent after lowering its third quarter earnings guidance due to higher fuel costs and expenses related to a new labor agreement.

Oil service stocks are also giving back ground despite a modest increase by the price of crude oil, while some strength is visible among semiconductor stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index dipped by 0.2 percent, while China’s Shanghai Composite Index fell by 0.5 percent.

The major European markets have also moved to the downside on the day. While the U.K.’s FTSE 100 Index is down by 0.3 percent, the French CAC 40 Index and the German DAX Index are down by 0.7 percent and 0.8 percent, respectively.

In the bond market, treasuries have climbed well off their early lows but continue to see modest weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.2 basis points at 4.286 percent.

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