U.S. stocks ended higher on Wednesday led by a tech rally offsetting the earlier disappointment following the release of the inflation report that dashed hopes of a 50-basis point rate cut by the Federal Reserve in its September policy meeting. All three major indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.3% or 124.75 points, to end at 40,861.71 points, after declining as much as 1.8% at one point of the day.
The S&P 500 gained 1.1% or 58.61 points, to finish at 5,554.13 points, after dropping as much as 1.6% during its session lows. Consumer discretionary and tech stocks were the biggest gainers.
The Technology Select Sector SPDR (XLK) jumped 3.4%. The Consumer Discretionary Select Sector SPDR (XLY) added 1%. Six of the 11 sectors of the benchmark index ended in positive territory.
The tech-heavy Nasdaq jumped 2.2 % or 369.65 points to close at 17,395.53 points.
The fear-gauge CBOE Volatility Index (VIX) was down 7.29% to 17.69. Advancers outnumbered decliners on the NYSE by a 1.4-to-1 ratio. On the Nasdaq, a 1.24-to-1 ratio favored advancing issues. A total of 12.19 billion shares were traded on Wednesday, higher than the last 20-session average of 10.8 billion.
Markets Turn Volatile After Mixed Inflation Data
Investors' sentiment was dented on Wednesday morning following the release of mixed inflation data. The Labor Department reported that the consumer price index (CPI) rose 0.2% in August, in line with July and also the consensus estimate.
However, stocks tumbled as the core CPI, which excludes the volatile food and energy prices, rose 0.3%, higher than expectations of an increase of 0.2%.
This crushed hopes of a half-point rate cut by the Federal Reserve in its upcoming FOMC meeting. Market participants are now pricing in an 85% chance for a 25-basis point rate cut by the Fed up from 66% on Tuesday. On the other hand, the probability of a 50-basis point rate cut dropped to 15% from 34% seen a day earlier, according to the CME Group’s FedWatch Tool.
However, year-over-year, CPI rose 2.5%, down 0.4% from July and the consensus estimate of 2.6%. This is the lowest annualized level since February 2021, which is being seen as the biggest positive in the August inflation data. Year over year, core CPI rose 3.2%, in line with economists’ expectations.
Tech Stocks Drive Rally
Wednesday’s initial disappointment was offset by a tech rally in the afternoon session helped by dip buyers. NVIDIA Corporation (NVDA) led the rally, following a report that the U.S. government is thinking about allowing the semiconductor giant to export high-tech chips to Saudi Arabia.
The company’s shares ended 8.2% higher. NVIDIA carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Mega-cap tech stocks gained the most. Shares of Microsoft Corporation (MSFT) rose 2.1%. Also, shares of Apple Inc. (AAPL) rose 1.2%.
Also, some major U.S. lenders who took a beating in the earlier session ended the day with small gains. Goldman Sachs Group, Inc. (GS) rose 0.9% on Wednesday. Shares of JPMorgan Chase & Co. (JPM) closed 0.8% higher.
Investors are now awaiting the release of the producer price index (PPI) report, another key inflation reading, due on Thursday morning.
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