Stocks were mostly flat Wednesday with the major averages well within striking distance of records as investors shrugged off the latest consumer price reading showing the biggest jump in inflation in more than 30 years.
After opening lower, shares rallied back to the flatline. Investors appeared to make the bet that inflation would eventually ease somewhat. American Express led the Dow as rates jumped. Tech shares remained weak, weighing down the market.
The Dow Jones Industrial Average was little changed. The S&P 500 traded near the flatline.The Nasdaq Composite dipped 0.3%.
The consumer price index jumped 6.2% from a year ago, well above the 5.9% estimate from economists polled by Dow Jones and the largest annual increase since 1990. On a monthly basis, the CPI increased 0.9% against the 0.6% estimate. The CPI is a basket of products ranging from gasoline and health care to groceries and rents.
“Wednesday’s Consumer Price Index showed another month of inflation data well above the Federal Reserve’s inflation target, primarily due to continued supply chain issues and labor shortages. If inflation doesn’t subside, the Federal Reserve may need to taper at a more substantial rate and hike interest rates, which could hurt stocks and bonds,” Nancy Davis, founder of Quadratic Capital Management, said.
The 10-year Treasury yield rose after the CPI report. Rising rates discount the value of future earnings and therefore can hit growth stocks like technology names particularly hard.
Technology stocks moved lower. Advanced Micro Devices pulled back more than 2%, Google-parent Alphabet and Nvidia each dipped more than 1%.
Meanwhile, Tesla rebounded more than 4% after the electric vehicle stock closed the prior session nearly 12% lower. Tesla led gainers on the S&P 500.
On Tuesday morning, the Labor Department reported a 0.6% increase in the October producer price index, which was in line with the Dow Jones consensus estimate. Wholesale prices jumped 8.6% in October from a year ago, however, the hottest annual pace on record in almost 11 years.
Earnings season continues to be strong, with most of the S&P 500 companies who have already reported beating estimates.
Disney, Affirm, Bumble and The Honest Company are all scheduled to report earnings Wednesday after the bell.
