4:15pm: Equities rally
The three major stock indexes bounced back from a post-CPI selloff on Wednesday afternoon, with the Nasdaq leading the gains as chipmaker Nvidia added 8%.
The Nasdaq was up 2.2% at 17,395 points, the S&P 500 was up 1.1% at 5,554 points, and the Dow Jones was up 0.3% at 40,861 points.
2:30pm: CPI 'not worrisome'
August's CPI was "stronger than expected but not worrisome," according to Bank of America.
"Though the report was not as encouraging as previous months' reports, we think that the data still support our outlook for gradual disinflation," analysts wrote.
The stronger-than-expected data is consistent with a 25bp cut next week, they noted.
"It is too early to declare victory on inflation: current levels of housing inflation are not consistent with the Fed's 2% core PCE inflation mandate. As long as a soft landing remains in play, we think that the Fed cannot take its eye off the ball on inflation. Therefore, a methodical cutting cycle (25bp per meeting) seems to be the most prudent path for now."
1:05pm: Wall Street mixed
The Dow Jones remained in negative territory in the early afternoon as an unexpected rise in inflation had investors reassessing the Federal Reserve’s potential rate-cutting path.
The index was down 0.6% or 223 points at 40,513 while the S&P 500 slipped 0.1% at 5,491 points.
The Nasdaq managed to hold onto the previous day’s gains, up 0.7% at 17,138 points.
“Traders were distinctly unimpressed by today’s inflation report in the US, which failed to energize markets that are nervously awaiting next week’s Fed rate cut,” IG chief market analyst Chris Beauchamp commented.
“It seems like every major event that might settle the issue of a 25 or 50bps cut turns out to be a damp squib, though the likelihood of a 50bps move does continue to recede. But with oil prices and other commodities having fallen sharply over the past week, there are real worries that sustained economic weakness is around the corner.”
Meanwhile, meme stock GameStop Corp (NYSE:GME) was down almost 14% as the video game retailer reported a decline in sales for the latest quarter, despite posting a surprise profit.
11:45pm: Dow drops after CPI read
The Dow lost nearly 600 points on Wednesday morning as investors reacted to the latest CPI data.
The index started to claw back by midmorning, down around 1.1% just before noon at 40,296 points.
The big picture on inflation is positive, according to Bill Adams, chief economist at Comerica Bank.
"Despite slower total inflation, the Fed will likely see the CPI report as a pebble on the scale toward a modest quarter percentage point rate cut at next week’s decision," Adams wrote.
"Market-implied inflation expectations over the next two years are for CPI inflation of just 1.5%, meaning an extended undershoot of the Fed’s target. If inflation does slow that much, the Fed would likely cut rates faster than just a quarter percent per meeting over the next 3-6 months.
"However, the stickiness of service price inflation and shelter inflation suggests the Fed will cut rates slower than financial markets currently price in."
9.50pm: Nasdaq holds onto Tuesday gains
As pre-market trades suggested, the Nasdaq 100 opened flat at a little over 18,800 today, thus retaining the 0.9% of gains tallied on Tuesday.
The broader markets were less buoyant in today’s opening exchanges, with the Dow Jones dipping a full percentage point and the broader &P 500 index falling by 0.6%.
Chimakers led the Nasdaq risers, with ARM Holdings plc, Nvidia Corp, Marvell Technology Ltd and Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD) all adding more than 2%.
In the macroeconomic space, US inflation showed slight improvement over expectations in August, with the annual inflation rate slowing to 2.5%, down from 2.9% in July.
This marked the lowest inflation rate since February 2021 and came in below the forecast of 2.6%.
9.19pm: US inflation slightly beats forecasts
US inflation in August showed slight improvement over expectations, with the annual inflation rate slowing to 2.5%, down from 2.9% in July.
This marked the lowest inflation rate since February 2021 and came in below the forecast of 2.6%.
Energy prices contributed significantly to the decline, with gasoline prices dropping by 10.3% and fuel oil by 12.1%.
Food prices also eased, recording a 2.1% increase compared to 2.2% in the previous month, and transportation inflation fell to 7.9% from 8.8%.
In contrast, shelter costs rose by 5.2%, up from 5.1% in July, and remained the primary factor in the monthly rise of the Consumer Price Index (CPI).
On a monthly basis, the CPI increased by 0.2%, consistent with the prior month and meeting market expectations.
Core inflation, which excludes food and energy, rose by 0.3% in August, exceeding the anticipated 0.2%.
Despite the inflation print coming in better than expected, it is unlikely to be enough to rebase the market’s interest rate expectations from the Federal Reserve.
The likelihood remains that the Fed will cut the base rate by 25 basis points rather than a meatier 50 basis points that some doves would like to see.
8.25am: Nasdaq to retain Tuesday gains
US technology stocks are expected to open flat today after a solid session of gains on Tuesday.
The Nasdaq 100 tech index closed 0.9% higher, despite concerns of a slide in Apple Inc (NASDAQ:AAPL, ETR:APC)’s share price following a ‘meh’ unveiling of its new iPhone 16 handheld.
Apple shares ultimately closed 0.4% lower, but this was offset by strong gains for Tesla Inc (NASDAQ:TSLA), Broadcom Inc (NASDAQ:AVGO, ETR:1YD), Moderna Inc (NASDAQ:MRNA, ETR:0QF), Amazon.com Inc (NASDAQ:AMZN) and other tech giants.
Pre-market trades have the Nasdaq 100 stay put at yesterday’s 18,822 closing price, while the broader S&P 500 will also open flat at 5,491.
Futures on the The Dow Jones Industrial Index have it opening 0.25% lower at 40,631.
Most of the attention will be on the impending inflation data.
Annual inflation is expected to fall to 2.6%, potentially marking the sixth straight month of falling prices in a row but still above the 2% target.
Core consumer price inflation, which excludes volatile items such as food and energy, is expected to stay flat at 3.2%.
In London, the FTSE 100 is currently 10 points higher at 8,215.