Stocks Keep Climbing as Nvidia Powers Tech Rally: Markets Wrap

(Bloomberg) -- A rally in the world’s largest technology companies spurred a stock-market rebound in a volatile session that had Wall Street traders digesting faster-than-anticipated inflation data.

The S&P 500 rose almost 1% while the Nasdaq 100 rallied 1.8%. It was the first time since October 2022 that each gauge erased an intraday loss of at least 1.5%. Chipmakers led gains on Wednesday, with Nvidia Corp. up 7.5%. Treasury two-year yields edged up on bets the Federal Reserve will move gradually with rate cuts. Swap traders have fully priced in a quarter-point Fed reduction next week.

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“While we’ve seen a slight pullback in stocks as of late with choppy earnings and economic data, we would expect more smooth sailing post this initial Fed rate cut and post-election, as uncertainty fades and investors start to price-in 2025 earnings,” said Skyler Weinand at Regan Capital.

While stocks bounced back, sentiment remained “cagey,” according to Fawad Razaqzada at City Index and Forex.com.

“Concerns over a weakening global economy have derailed stocks this month,” he noted. “There is also the added risk of the presidential elections. We could see the recovery falter again later in the week.”

The S&P 500 hovered near 5,540. The Dow Jones Industrial Average rose 0.2%. The Russell 2000 Index of smaller companies added 0.3%. The KBW Bank Index fell 0.4%.

Treasury 10-year yields were little changed at 3.65%. The dollar fell. Oil climbed as Hurricane Francine ripped through key oil-producing zones in the US Gulf of Mexico, prompting traders to cover bearish bets. 

The so-called core consumer price index — which excludes food and energy costs — increased 0.3% from July, the most in four months, and 3.2% from a year ago, Bureau of Labor Statistics figures showed Wednesday. The three-month annualized rate advanced 2.1%, picking up from 1.6% in July, according to Bloomberg calculations.

“The firmer-than-expected core inflation print will make it harder for Jerome Powell to deliver a 50 basis-point cut in September,” said Krishna Guha at Evercore. “We continue to think a starter 50 basis-point cut is the right play and might even now win out. But the odds have moved against this, and risks to markets and the soft landing are higher as a result.”

Guha noted that if the Fed doesn’t cut rates by 50 basis points next week, it will possibly do that in November.

“Going forward, the risks are clearly weighted toward slowing growth and a deteriorating labor market, and that’s why there are still four 25 bps cuts priced in with only three meetings left in the year,” said Chris Zaccarelli at Independent Advisor Alliance. “If the economy continues to slow – and not drop into an abrupt recession – the Fed will be able to cut at a measured, 25 basis-point per meeting pace.”

To David Russell at TradeStation, while the latest inflation numbers aren’t “runaway dovish,” they confirm the cooling process remains in effect. Attention could now shift from the Fed as a catalyst toward earnings and the election cycle, he noted.

“This isn’t the CPI report the market wanted to see,” said Seema Shah at Principal Asset Management. “The number is certainly not an obstacle to policy action next week, but the hawks on the committee will likely seize on today’s CPI report as evidence that the last mile of inflation needs to be handled with care and caution.”

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This story was produced with the assistance of Bloomberg Automation.

--With assistance from Lu Wang.

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