The Nasdaq composite led major stock market indexes higher Wednesday after wholesale inflation was reported to be in line with economists' estimates. Oil stocks surged.
The Nasdaq composite was trading 0.6% higher in the stock market at midday. The Dow Jones Industrial Average gained 0.4% while the S&P 500 was up 0.5%.
The small-cap Russell 2000 index was up 0.2%.
Volume fell on the Nasdaq and the NYSE vs. the same time on Tuesday.
On Tuesday, all three major stock indexes gapped below their 50-day moving averages.
Wholesale Inflation Rises But Meets Economists' Forecasts
The U.S. Labor Department said the producer index, or PPI, fell 0.1% in August vs. the previous month, matching estimates. Wholesale inflation rose 8.7% from a year ago, down from July's 9.8% surge and in line with Econoday estimates.
On Tuesday, the CPI inflation rate eased to 8.3%, retreating from July's 8.5% and June's 9.1% rate, amid falling gas prices.
"Goods prices and services prices are on two very different paths," said Jeffrey Roach, Chief Economist for LPL Financial. "The nagging problems with U.S. inflation are not with goods prices but with services prices. Durable goods prices are falling. However, services prices, which are labor-intensive, are still rising. We see this in both the consumer and the producer price reports."
As a result, markets now believe there is a 30% chance of a full percentage point increase at the Federal Reserve's next meeting, vs. a 70% chance of a 0.75% rate hike. Before Tuesday, Wall Street did not place odds on that possibility at all.
The 10-year U.S. Treasury note yield was flat at 3.41% after jumping 10 basis points on Tuesday.
Energy Stocks Lift Stock Market
U.S. crude oil prices rose 1.8% on Wednesday to $88.90 per barrel.
The S&P Energy Select Sector ETF was the best performing sector ETF on Wednesday, jumping 2.1%.
ConocoPhillips climbed above a buy point of 115.57 from a cup-with-handle base in heavy volume. Northern Oil & Gas broke out above the 33.60 buy point of another cup-with-handle base. Volume was heavy.
The Innovator IBD 50 ETF surged 2.4% on the back of rising oil stocks.
Rail stocks Union Pacific and CSX plunged Wednesday as unionized rail workers, negotiating for better pay and benefits, could go on strike as soon as Friday. A rail strike would hit multiple sectors as it could stop the transportation of food, lumber, coal and other goods across the country. More than 115,000 rail workers have the legal go ahead to strike on Friday. UNP dropped 5% and CSX was down nearly 3%.
Cybersecurity firm Palo Alto Networks on Wednesday became the latest technology company to pull off a stock split this year. Palo Alto announced its 3-for-1 stock split on Aug. 22.
PANW stock joins Google-parent Alphabet, Amazon.com and Shopify in announcing stock splits this year amid a bear market.
Steel Stocks Fall After Nucor Cuts Outlook
In the first day of trading post-split, Palo Alto stock slipped 1%. PANW stock had retreated just over 1% this year as of the market open on Wednesday, far outperforming the 17% drop in the S&P 500.
Among exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust was up 0.7%, and the SPDR S&P 500 ETF gained 0.4% by midday.
Nucor said Wednesday that it now expects third-quarter earnings to be well below analyst estimates, attributing the shortfall to "metal margin contraction and reduced shipping volumes particularly at our sheet and plate mills."
Nucor now predicts earnings of $6.30 to $6.40 per share, well below estimates of $7.56 a share from analysts polled by FactSet. The steelmaker didn't comment on economic conditions.
NUE stock fell 9.6%. Among other steel producers, Steel Dynamics fell 8.4% and U.S. Steel dropped 8.3%.
Dow Jones component Johnson & Johnson rallied over 2% after it announced a $5 billion share buyback program and confirmed its outlook for full-year earnings of $10.65-$10.75 a share.
Follow Michael Molinski on Twitter @IMmolinski
