The Nasdaq advanced on Wednesday, while the S&P 500 and Dow Jones edged lower. Despite the day’s mixed performance, the Nasdaq and S&P 500 posted their second consecutive quarterly gains as softer-than-expected inflation data lowered expectations of an October Federal Reserve rate hike, Reuters reported.
The US Commerce Department reported that the Personal Consumption Expenditures Price Index rose 3.4% year over year in August, below the 3.7% increase forecast by economists polled by Reuters.
Separately, the final estimate of second-quarter US economic growth was revised upward to an annualised rate of 2.2%, supported by robust consumer spending and investment in AI infrastructure.
Rising crude prices linked to the US-Iran conflict and higher diesel costs have fuelled inflation concerns and pushed Treasury yields higher. Fed officials have also indicated that further rate increases may be necessary if price pressures fail to ease, after the central bank lifted rates by 25 basis points earlier this month.
The yield on the two-year Treasury note, which closely tracks expectations for Fed policy, declined after the data. Longer-dated yields continued to climb on expectations of resilient economic growth.
Traders now see a roughly 39% chance that the Fed will raise rates by at least 25 basis points in October, according to CME Group’s FedWatch Tool. That was down from about 51% in the previous session and nearly 71% a week earlier.
Analysts said recent changes by the Bureau of Economic Analysis to the methodology used to calculate the PCE index also contributed to the lower reading.
“What the market is focused on is, is the economy continuing to grow and can it manage those higher interest rates? And I would say so far, the market has looked kind of like history that when the economy is growing, when profits are strong, when there’s a secular theme, it will look past higher interest rates,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
“However... if these higher rates stay at these elevated levels for longer, it’s likely to start doing potentially more damage to the bond side of the portfolio, it could limit credit or available credit. And if investors start to feel those conditions could weigh on economic growth or weigh on corporate profitability over the next quarter or two, then I think you would see a very swift negative reaction in the market.”
S&P 500, Nasdaq head for monthly gains
The S&P 500 lost 18.13 points, or 0.23%, to end at 7,652.71 points, while the Nasdaq Composite gained 66.46 points, or 0.25%, to 26,864.00. The Dow Jones Industrial Average fell 431.84 points, or 0.84%, to 50,918.08.
The S&P 500 and Nasdaq were on track for their second consecutive monthly gain, while the Dow was poised to end a five-month winning streak.
The S&P 500 and Nasdaq were also headed for a second straight quarterly advance and their fifth quarterly gain in the past six quarters.
Most megacap and growth stocks rose. Amazon.com, Apple, Nvidia and Alphabet each gained more than 1%, helping information technology and communication services lead the S&P 500’s sector advances.
Private payrolls rise in September
Private employers added 90,000 jobs in September, following a downwardly revised increase of 36,000 in August, according to the ADP National Employment Report.
The figures were the latest in a series of labour-market reports this week ahead of Friday’s closely watched government payrolls data.
Among other movers, Hewlett Packard Enterprise climbed after the AI server maker raised its long-term revenue growth forecast for its networking business and announced a $1.2 billion deal with Vultr.
Moderna slumped after brokerage Citigroup downgraded its rating on the biotech company to "sell" from "neutral."
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)
