MW U.S. stocks get lift after cooler-than-expected inflation reading
By Steve Goldstein and William Watts
U.S. stocks traded modestly higher early Tuesday, finding support after data showed a smaller-than-expected rise in August inflation.
What's happening
On Monday, the Dow jumped 262 points, or 0.8%, to end at 34869, ending a five-session losing run. The S&P 500 rose 10 points, or 0.2%, to 4468, while the Nasdaq Composite slipped 10 points, or 0.1%, to 15105.
What's driving markets
The U.S. consumer price index rose 0.3% in August, while the core reading, which excludes volatile food and energy prices, was up just 0.1%.
The CPI increased 5.3% year over year, compared with expectations for a 5.4% increase, and a rise of 5.5% for the year in July. The year-over-year change in core CPI fell back to 4% from 4.3% in July. Expectations were for a year-over-year pace of 4.2%.
"Coupled with the soft August jobs report, indications that the pace of rising prices are ebbing may provide the Fed with a bit more leeway in determining when to begin to pare back its bond purchases," said Jim Baird, chief investment officer at Plante Moran Financial Advisors, in emailed comments.
Economists and investors "will continue to monitor comments from Fed officials for any hints about the timing and magnitude of that first step and what it may indicate for the path ahead for monetary policy," he said.
Some analysts saw the market reaction as a knee-jerk move that could fade.
"The markets responded as if this slightly weaker inflation data was going to change the time of the taper. I, for one, don't expect this to be a game changer," said Fawad Razaqzada, analyst at ThinkMarkets, in a note.
The Fed is still likely to announce a plan to begin tapering its bond purchases before the end of the year, he said, noting that the reading reflected declines in items such as airfares, accommodation and used cars, which Fed officials had already expected to fall back. Meanwhile, worries over more persistent factors driving up price pressures remain.
Earlier, the National Federation of Independent Business said its small-business optimism index rose 0.4 point in August to 100.1. Small-business owners were somewhat more optimistic about the economy, but said record shortages of labor and supplies were cutting into sales and profits.
-Steve Goldstein
What companies are in focus?
How are other assets trading?
$(END)$ Dow Jones Newswires
September 14, 2021 09:47 ET (13:47 GMT)
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