Stocks rose on Wednesday as investors shrugged off higher-than-expected inflation data and looked ahead to a key consumer report that will inform the Federal Reserve’s future pace of interest rate hikes.
The Dow Jones Industrial Average rose 169 points, or 0.58%.The S&P 500 rose 0.28%, boosted by a 10% gain in the stock modern, the biggest gainer in the index. The Nasdaq Composite rose 0.12%.
Earlier in the morning, stocks swung between gains and losses when the September producer price index, which measures wholesale prices for final demand, was higher than expected. Prints rose 0.4% in September, beating the consensus estimate of 0.2%, according to Dow Jones data.
The PPI number is one of the inflation indicators investors watch alongside the Fed. If inflation remains high, the central bank is more likely to continue its aggressive rate hike path to regain control. That means interest rates will continue to rise, possibly for longer than the market expects, 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 for a basket of common consumer goods and services.
“Prices are still high, so it’s not a surprise to see productive goods and services rising. Keep in mind that the gains are still lower than the gains we’ve seen consistently month after month earlier this year,” said Model Portfolio Construction Manager. Mike Loewengart speaks at the Morgan Stanley Global Investment Office. “There is no doubt that the Fed still has a lot of work to do, and if tomorrow’s CPI numbers are hot, don’t be surprised to see how long it may take some investors to start grasping the path to easing inflation. “
The minutes of the Fed’s September meeting will also be released on Wednesday. While Federal Reserve Chairman Jerome Powell acknowledged that aggressive rate hikes could be painful, the central bank will continue to fight to bring down inflation.