Matteo Colombo
Wall Street’s major indices were marginally higher in Wednesday’s late-morning action, as the S&P 500 looks to break a five-session losing streak. Investors parsed a bigger-than-anticipated rise in wholesale inflation and looked ahead to the release of the latest U.S Federal Reserve minutes.
The S&P 500 (SP500) was +0.21% at 3,596.48 points, the tech-heavy Nasdaq Composite (COMP.IND) was +0.15% at 10.44K points, and the blue-chip Dow 30 (DJI) was +0.45% at 29.37K points.
In the day’s biggest economic news, September PPI rose 0.4% and 8.5% Y/Y, both above estimates, while core PPI gained an expected 0.3%.
“The headline was boosted by a surprisingly big 1.2% jump in food prices, which have been wild in recent months, and a 0.7% increase in energy prices, led by natural gas and fuel oil; gasoline prices fell,” Pantheon Macro said.
The hot inflation data adds to overall worries of rising prices and the Fed’s aggressive response. The minutes of the central bank’s September meeting, due later in the day, will shed more light on policymakers’ thinking, as Wall Street hopes for a near pivot in Fed policy away from its current ultra-hawkish stance.
Rates were a shade lower. The 10-year Treasury yield (US10Y) was down by 1 basis point at 3.93% and the 2-year yield (US2Y) was down by 2 basis points at 4.30%.
Among individual stock movers, PepsiCo rose after the beverage giant beat on both Q3 top and bottom line, despite a stronger U.S. dollar and high inflation.
The Nasdaq (COMP.IND) and S&P (SP500) have posted five straight sessions of losses, with events in UK debt markets weighing on investor sentiment on Tuesday. This came after Bank of England Governor Andrew Bailey confirmed that there was a Friday deadline for bond purchases and for pensions funds to beef up their accounts before the central bank stopped its intervention.
Chatter around this topic remains complicated, with some characterizing Tuesday’s comments an all-time central banking gaffe. The FT reported that the BoE could still reverse course and continue its support of the shaky gilt market. However, the BoE then pushed back against that claim, once again pointing Oct. 14 as the deadline for Bank of England gilt buying.
Yields have jumped again, with the 30-year gilt yield up more than 20 basis points, topping 5%, and the 20-year yield at its highest level since 2008.
However, according to Deutsche Bank research, 10-year gilt yields have returned to average levels after being the most expensive ever a couple of years ago.
