US stocks ‘see-saw’ after wholesale inflation data
Treasury yields holding relatively steady US producer price inflation eases to ‘still-high’ at 8.5%
NEW YORK, Oct 12, (AP): US stocks wavered in unsettled trading on Wall Street Wednesday after a report showed that inflation remains very hot.
The S&P 500 rose 0.2% as of 11:22 a.m. Eastern. The index was roughly evenly split between gainers and losers and has shifted between small gains and losses in morning trading.
WASHINGTON, Oct 12, (AP): Inflation at the wholesale level rose 8.5% in September from a year earlier, the third straight decline though costs remain at painfully high levels.
Wednesday’s report from the Labor Department also showed that the producer price index - which measures price changes before they reach the consumer - rose 0.4% in September from August, after two months of declines.
The September monthly increase was larger than expected and was pushed higher by a big increase in hotel room costs and higher prices for other services. Food costs also rose in September from August, after a slight drop the previous month. The cost of fresh and dry vegetables soared nearly 16% in September from August.
The larger-than-expected monthly increase in overall wholesale prices suggests inflation pressures are still strong in the U.S. economy, with the Federal Reserve likely to continue its rapid pace of interest rate hikes at its next meeting in November.
Production cuts
Wholesale gas costs fell last month, but will likely reverse in the coming months now that oil prices are rising again in the wake of planned production cuts by many oil exporting nations. Grocery bills are rising at their fastest pace in decades, and prices at the gas pump are rising again, squeezing consumers’ budgets.
Excluding the volatile food and energy categories, core prices rose 0.3% in September from August for the third straight month, and 7.2%
The Dow Jones Industrial Average rose 170 points, or 0.6%, to 29,410 and the Nasdaq rose 0.3%.
Consumer goods and health care companies gained ground. Moderna surged 9.5% after announcing a deal with Merck to develop a cancer vaccine. PepsiCo rose 3.4% after raising its profit forecast for the year following encouraging quarterly financial results. Small company stocks fell in a potential sign that Wall Street is worried about economic growth. The Russell 2000 slipped 0.6%.
Treasury yields, which have driven much of Wall Street’s recent trading, were holding relatively steady. The yield on the 10-year Treasury, which affects mortgage rates, fell to 3.94% from 3.95% late Tuesday. The yield on the 2-year Treasury remained at 4.31% from late Tuesday.
Markets have been volatile all week as investors wait for the latest round of big company earnings reports and fresh reports on inflation and retail sales. The benchmark S&P 500 is coming off five straight losses and is close to its lowest point in nearly two years.
A report from the government showed that inflation at the wholesale level eased last month, though it was a bit worse than economists expected. A more closely watched component of the inflation data matched economists’ forecasts. compared with a year earlier.
Overall wholesale inflation peaked at 11.7% in March.
Services prices - including health care, lodging, and shipping - rose 0.4% in September, the most in three months. Federal Reserve officials have recently cited rising services prices as a source of concern, because they can take longer to reverse since they mostly reflect the impact of rising wages.
Health care costs rose last month, driven higher by a 0.7% increase in nursing home prices.
Headaches
Stubbornly-high inflation is draining Americans’ bank accounts, frustrating small businesses and raising alarm bells at the Federal Reserve. It is also causing political headaches for President Joe Biden and congressional Democrats, most of whom will face voters in mid-term elections in less than a month.
The Fed has boosted its benchmark short-term interest rate by three percentage points since March to combat rising prices. It’s the fastest pace of rate hikes since the early 1980s. Higher rates are intended to cool consumer and business borrowing and spending and bring down inflation..
Wednesday’s producer price data captures inflation at an earlier stage of production and can often signal where consumer prices are headed. It also feeds into the Fed’s preferred measure of inflation, which is called the personal consumption expenditures price index.
Inflation updates
Inflation updates are being closely watched by investors who worry that stubbornly high prices on everything from food to clothing could lead to a recession. Those worries have been worsened by central banks around the world raising interest rates to make borrowing more expensive and slow economic growth.
The Federal Reserve has been particularly aggressive, and its strategy carries the risk of stalling an already slowing economy and causing a recession. The central bank will release minutes from its last meeting later on Wednesday, possibly giving Wall Street more insight into its views on inflation and next steps on interest rates.
Europe
France’s CAC 40 gained 0.1%, while Germany’s DAX rose 0.2% and Britain’s FTSE 100 inched back 0.1%.
Asia
Japan’s benchmark Nikkei 225 was virtually unchanged, losing 4 points to finish at 26,396.83. Australia’s S&P/ ASX 200 was up 2.5 points to 6,647.50. Hong Kong’s Hang Seng slipped 0.8% to 16,700.31, while the Shanghai Composite climbed 1.5% to 3,025.51.
South Korea’s Kospi added 0.5% to 2,202.47 after the Bank of Korea raised its key rate by 0.5 percentage points, against the backdrop of the U.S. Fed rate hikes, which have boosted the value of the dollar against many other currencies, including the won.
Oil
In energy trading, benchmark U.S. crude rose 38 cents to $89.73 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude oil prices fell 2% Tuesday. Brent crude, the international pricing standard, rose 63 cents to $94.92 a barrel.
Currencies
The British pound weakened against the U.S. dollar after the governor of the Bank of England, Andrew Bailey, confirmed the bank will not extend beyond Friday an emergency debt-buying plan introduced last month to stabilize financial markets. The pound fell by almost 1% to just below $1.10 after Bailey spoke, before rallying slightly.
The Japanese yen declined to a 24year low against the U.S. dollar to 146 yen-levels, raising expectations of an intervention to prop up the yen following one such move in September. The dollar was trading at 146.59 Japanese yen, up from 145.80 yen. The euro cost 97.10 cents, inching up from 97.07 yen.