Stocks rose Wednesday as investors shook off inflation data that came in higher than expected and looked ahead to a key consumer report that will inform the pace of the Federal Reserve’s rate hikes going forward.
The Dow Jones Industrial Average gained 169 points, or 0.58%. The S&P 500 rose 0.28%, bolstered by a 10% jump in shares of Moderna, the top gaining stock in the index. The Nasdaq Composite ticked up 0.12%.
Stocks whiplashed between gains and losses earlier in the morning when the September producer price index, a gauge of final-demand wholesale prices, came in higher than expected. The print was up 0.4% in September, more than the consensus estimate of a 0.2% increase, according to Dow Jones.
The PPI number is one of the inflation gauges investors are watching alongside the Federal Reserve. If inflation stays high, the central bank is more likely to continue its aggressive path of interest rate hikes to bring it back into check. That means rates will continue to rise and may stay high for longer than markets expect, weighing on stocks.
Investors will get more inflation data on Thursday, when the September consumer price index report is released. The CPI number is a measure of price changes in a basket of common consumer goods and services.
“Prices remain elevated so it shouldn’t be a surprise to see producer goods and services rise. Keep in mind the increase is still below what we were seeing consistently month after month earlier this year,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. “No doubt the Fed still has its work cut out for them, and if tomorrow’s CPI read is hot, don’t be surprised to see some investors come to grips with how long the road to tamer inflation may be.”
The minutes from the Federal Reserve’s September meeting will also be released Wednesday. While Fed Chairman Jerome Powell has acknowledged that aggressive interest rate increases could be painful, the central bank will continue to charge forward in its fight to lower inflation.