Rising tech stocks push Nasdaq into the green as stocks waver after inflation data

What’s driving markets

The September CPI Index showed consumer prices rose by 0.4% last month, just above economists’ expectations for a 0.3% increase. Meanwhile, core CPI, which strips out volatile food and energy prices, came in at 0.3%, which was exactly in line with expectations.

On a year-over-year basis, headline consumer prices rose 3.7%, unchanged from August but higher than the 3.6% increase economists had expected.

See: CPI report shows headline inflation for September was hotter than forecast on rising shelter costs 

Check out: MarketWatch CPI live blog

Although stocks retreated after the data, the Nasdaq Composite popped back into positive territory in midmorning trade as members of the “Magnificent Seven” advanced. The group of megacap stocks includes Apple Inc.
AAPL,
+1.08%,
Meta Platforms Inc.
MSFT,
+0.05%,
Alphabet Inc.’s Class A
GOOGL,
-0.12%
and Class C
GOOG,
-0.09%
shares, Amazon.com Inc.
AMZN,
+1.61%,
Tesla Inc.
TSLA,
+0.30%,
Nvidia Corp.
NVDA,
+1.14%
and Microsoft Corp.
MSFT,
+0.05%
Only Tesla and Microsoft were lower on the day in recent trade.

Analysts said the inflation data didn’t offer much guidance about the Fed’s next move, even as the market-based probability of a hike in December crept higher. CME data showed expectations for a hike rose to nearly 35% after the data were released, up from 26% a day earlier.

“A mixed report leaves the Fed hanging. CPI rose a tad more than expected, core CPI did the opposite. We could get one more hike, or none at all,” said Giuseppe Sette, president of Toggle AI, in emailed commentary.

Seema Shah, chief global strategist at Principal Asset Management, described the report as “reassuringly uneventful.”

“With core CPI in line with expectations and extending the disinflation narrative, there is nothing in the inflation report that should sway the Fed in one direction or the other,” she said in emailed commentary.

Others, notably Krishna Guha of Evercore ISI, said the data could complicate the Fed’s inflation-fighting efforts.

“The September CPI report is not a good one for the Fed, but will keep the U.S. central bank in wait-and-see mode as it weighs bumpier progress on both disinflation and labor rebalancing in a context of firmer than expected growth against the additional drag from the step-up in yields over recent months,” he said in emailed commentary.

Federal Reserve Chairman Jerome Powell has said that the central bank is paying particularly close attention to core prices. Still, hotter-than-expected headline data caused stocks to deflate as market-based expectations for another Fed rate hike later this year ticked higher, according to CME’s FedWatch tool.

Treasury yields rose after the data, adding more pressure on stocks. The 10-year Treasury yield
BX:TMUBMUSD10Y
was up 7.2 basis points on the day at 4.642% after touching its lowest level in two weeks earlier. Yields on the 2-year Treasury note
BX:TMUBMUSD02Y
were up 7.2 basis points to 5.067%.

Producer-price inflation data released Wednesday also surpassed expectations. It showed producer prices rose 0.5% in September, down slightly from an 0.7% increase in August, but higher than what had been expected.

Minutes of the Fed’s September policy meeting, published Wednesday, showed members were “highly uncertain” about the future path of the economy and decided to proceed in a careful meeting-by-meeting approach to interest-rate policy.

U.S. stocks have risen sharply since Friday, when the Labor Department’s monthly jobs report showed a robust rise in job creation while wage growth continued to moderate. Some economists said the data appeared to support a soft landing.

These shifts had helped push the S&P 500 equity benchmark to a gain of 2.8% over the last four sessions.

Looking ahead, traders are now bracing for the start of third-quarter corporate earnings reporting season.

Aggregate S&P 500 earnings are forecast to have risen 1.3% from a year ago, according to Tajinder Dhillon, senior research analyst at Refinitiv, who also notes that the market has grown more optimistic about corporate profits of late.

Investors also digested a report on weekly jobless claims early Thursday. The data showed the number of Americans applying for unemployment benefits was flat at 209,000 last week.

Boston Fed President Susan Collins is due to speak about the economic outlook at 4 p.m. Eastern, the latest in a parade of senior Fed officials to share their latest views.

Companies in focus

• Walgreens Boots Alliance Inc.’s
  WBA,
  +4.76%
  stock was slightly higher after the drugstore chain and healthcare services company missed fiscal fourth-quarter profit expectations and provided a downbeat outlook. Shares had reversed losses from the premarket session.

• Shares of Delta Air Lines Inc.
  DAL,
  -0.69%
  rose Thursday, after the air carrier reported third-quarter profit that beat expectations, and said the “robust demand” for travel it has been seeing has continued into the current quarter.

• Victoria’s Secret & Co.’s
  VSCO,
  +1.47%
  shares rose more than 2% after the maker of bras, lingerie and sleepwear said it could lose less than previously thought during the third quarter.

• Ford’s
  F,
  -2.00%
  stock fell 2.5% after the United Auto Workers union said 8,700 workers had walked out of a truck-making factory in Louisville, Kentucky.