September 28, 2022

Wall Street swings to close higher as Fed rate hike looms

Wall Street swings to close higher as Fed rate hike looms

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

NEW YORK (Reuters) – Wall Street ended the session directionless higher on Wednesday as the target inflation report largely halted the flow of heavy selling on Tuesday and investors pressed the “pause” button.

The three indicators fluctuated throughout the day, but eventually ended in positive territory. They all failed to regain ground lost in Tuesday’s massacre, which caused their biggest percentage drop in more than two years.

“Today is the day to lick your wounds, after you took a physical hit yesterday,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. “It’s a day off and that’s somewhat of a welcome sign.”

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The Labor Department’s producer price data fell close to consensus estimates and provided some relief following Tuesday’s higher-than-expected CPI reading. Read more

“The inflation debate continued and yesterday was a cruel reminder that this is a tough fight and that the Fed needs to remain aggressive to put a lid on the rampant inflationary rates we are seeing,” Detrick added.

The PPI report provided reassurance that inflation is indeed on a slow and bearish path.

inflation

But it still has a long way to go before it gets close to the Fed’s 2% average annual inflation target, and while financial markets have fully priced in a rate hike of at least 75 basis points at the conclusion of next week’s FOMC policy meeting. They see a 22% chance of a significant volume increase of 100 basis points, according to CME’s FedWatch Tool.

Two-year US Treasury yields, which reflect interest rate expectations, continued to rise on Tuesday.

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

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

Transport sector (.DJT)Seen as a gauge of economic health that offers a glimpse into the supply side of inflation, rail stocks have been impacted in the face of a possible strike.

“Does the White House really want to shut down the railroad and affect supply chains even more, less than two months before the midterm elections?” asked Dietrich. “We are optimistic that they can keep the bars open.”

Union Pacific Rail Operators (UNP.N)Southern Norfolk (NSC.N) and CSX Corporation (CSX.O) It lost 3.7%, 2.2% and 1.0%, respectively, even as Labor Secretary Marty Walsh met with union representatives in Washington in talks aimed at preventing rail closures. Read more

Dow Jones Industrial Average (.DJI) The Standard & Poor’s 500 Index rose 30.12 points, or 0.1%, to 31,135.09 points (.SPX) It rose 13.32 points, or 0.34%, to 3,946.01 points, and the Nasdaq Composite (nineteenth) It added 86.10 points, or 0.74%, to 11,719.68 points.

Six of the 11 major sectors in the S&P 500 advanced, with energy stocks (.SPNY) Leading gainers are helped by higher crude oil prices due to supply concerns.

Starbucks Corporation (SBUX.O) Shares jumped 5.5 percent after the company raised its three-year profit and sales forecast. Read more

Tesla Corporation (TSLA.O) It recovered from Tuesday’s low, rising 3.6% on the same day that President Joe Biden announced $900 million in financing for electric car charging stations. Read more

Advance issues outnumbered decliners on the New York Stock Exchange by 1.05 to 1; On the Nasdaq, the ratio was 1.06 to 1 in favor of declining stocks.

The S&P 500 recorded two new highs in 52 weeks and 30 new lows; The Nasdaq recorded 26 new highs and 219 new lows.

Volume on US stock exchanges reached 10.90 billion shares, compared to an average of 10.33 billion over the last 20 trading days.

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Additional reporting by Stephen Kolb in New York.

Our criteria: Thomson Reuters Trust Principles.