Stocks seesawed Wednesday, trading in wide ranges, as traders weighed what the latest U.S. inflation data means for Federal Reserve policy. Tech shares led a rebound from steep session lows.
The S&P 500 traded 0.8% higher. The 30-stock Dow added 59 points, or about 0.1%, after losing as much as 743.89 points earlier in the day. The Nasdaq Composite added 1.8%, also clawing back its earlier losses.
Investors picked up shares of mega-cap tech and semiconductor names in afternoon trading, boosting the Nasdaq as Nvidia gained roughly 7.5% and AMD added more than 4.1%. The VanEck Semiconductor ETF gained about 4.5%.
Bank stocks, including JPMorgan Chase and Goldman Sachs, also rebounded from earlier lows and traded marginally higher.
Stocks initially tumbled after the core reading on the consumer price index — which strips out volatile food and energy categories — rose slightly more than expected. This dampened investor hopes for a half-point rate cut from the Federal Reserve. Traders are now pricing in an 85% chance that the central bank will approve a 25 basis point interest rate reduction at its Sept. 17-18 meeting, according to the CME Group’s FedWatch measure. Overall CPI, however, hit its lowest annualized level since February 2021.
“Taken on its own, [CPI] is not terrible,” said Steve Sosnick, chief strategist at Interactive Brokers. “But what the market did not need was a core reading that was higher than expected. I think it was a big splash of cold water on a market that was hopeful that a 50 basis-point rate cut might be in the cards. Those expectations have all but evaporated.”
The new data comes as investors grapple with seasonal headwinds. September has been the worst month for the S&P 500 over the last 10 years, averaging a loss of more than 1% during that time. The broad-market index has also posted a loss in September in the last four years.
The CBOE Volatility Index briefly traded above 20 before easing back to 18.
