Stocks edged higher Wednesday morning after another inflation data showed the major indexes fell to their worst day since June 2020 and dampened investor expectations for a less hawkish Fed.
Futures tied to the Dow Jones Industrial Average were last up 63 points, or 0.2%, while S&P 500 futures gained 0.18% and Nasdaq 100 futures gained 0.15%.
During Tuesday’s regular trading session, the Dow lost 1,276.37 points, or 3.94%, to close at 31,104.97, while the S&P 500 lost 4.32% to 3,932.69. The Nasdaq Composite rose 5.16% to 11,633.57. All major indexes broke their four-day winning streak.
The market moves after August’s Consumer Price Index report showed headline inflation rose 0.1% per month despite falling natural gas prices.
The red-hot inflation report has raised questions about whether stocks will return to their June lows or fall further. It has also raised some concerns that the Fed could raise rates even higher than the market is pricing in by 75 basis points.
“It caught the market off guard,” said Quincy Krosby of LPL Financial. “The market has been expecting that we’ve at least leveled off — maybe not down, but certainly not up. That’s the wrong direction, and of course, that concern always translates into what that means for the Fed.”
All 30 Dow stocks and the S&P 500 ended lower, with communications services leading the decline. The sector fell 5.6%, its worst one-day performance since February, dragged down by large tech stocks such as Netflix and Meta Platforms, which were down about 7.8% and 9.4%, respectively.
Producer prices are due on Wednesday morning and could provide further clues on inflation ahead of the Federal Reserve’s rate hike meeting next week.