After an initial move to the upside, stocks have given back ground over the course of the trading session on Wednesday. The major averages have pulled back well off their highs of the session, with the Dow and the S&P 500 falling into negative territory.
Currently, the major averages are turning in a mixed performance. While the Nasdaq is up 41.94 points or 0.3 percent at 12,221.50, the S&P 500 is down 2.85 points or 0.1 percent at 4,116.32 and the Dow is down 152.25 points or 0.5 percent at 33,409.56.
The initial strength on Wall Street partly reflected a positive reaction to the Labor Department’s highly anticipated report on consumer price inflation in the month of April.
The Labor Department said its consumer price index climbed by 0.4 percent in April after inching up by 0.1 percent in March. Economists had expected consumer prices to rise by 0.4 percent.
Excluding food and energy prices, core consumer prices also rose by 0.4 percent in April, matching the increase seen in March as well as economist estimates.
The report also showed the annual rate of consumer price growth edged down to 4.9 percent in April from 5.0 percent in March. Economists had expected the year-over-year growth to be unchanged.
The annual rate of core consumer price growth also slipped to 5.5 percent in April from 5.6 percent in March. The modest slowdown matched economist estimates.
With the annual consumer price growth marking the smallest 12-month increase since April 2021, the data added to optimism about the Federal Reserve pausing its interest rate hikes.
CME Group’s FedWatch Tool is currently indicating a 91.5 percent chance the Federal Reserve will leave interest rates unchanged at its next meeting in June.
Buying interest has waned over the course of the session, however, as traders worry the slowdown in the pace of price growth is partly due to the U.S. heading for a recession.
“We expect to receive more encouraging news on the inflation front as the economy cools though we won’t reach the Fed’s 2% inflation target for quite some time,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.
He added, “A positive consequence of the oncoming mild recession that we expect in H2 2023 is it should help ease price pressures.”
Oil service stocks are seeing considerable weakness on the day, dragging the Philadelphia Oil Service Index down by 1.8 percent.
The weakness among oil service stocks comes as the price of crude oil for June delivery is tumbling $1.42 to $72.29 a barrel following a report showing an unexpected weekly increase in U.S. crude oil inventories.
Steel and gold stocks have also come under pressure, with the NYSE Arca Steel Index and the NYSE Arca Gold Bugs Index sliding by 1.8 percent and 1.6 percent, respectively.
On the other hand, semiconductor stocks are showing a significant rebound after falling sharply on Tuesday, with the Philadelphia Semiconductor Index climbing by 1.1 percent.
Notable strength is also visible among software stocks, as reflected by the 1.1 percent gain being posted by the Dow Jones U.S. Software Index.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index fell by 0.4 percent, while China’s Shanghai Composite Index slumped by 1.2 percent.
The major European markets have also moved to the downside on the day. While the French CAC 40 Index has slid by 0.6 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both down by 0.4 percent.
In the bond market, treasuries have moved notably higher after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 7.1 basis points at 3.450 percent.
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