US stocks mixed at noon as Dow and S&P 500 make gains following release of hotter-than-expected inflation figures

12:05pm: Some gains for US stocks at noon  

US stocks were mixed at noon as hotter-than-expected US inflation data for April has highlighted the Fed’s need to continue with interest rate hikes over the coming months to curb inflation.

At noon, the Dow and the S&P 500 had both entered positive territory gaining 0.7% and 0.4% respectively.

The tech-laded Nasdaq, however, was lagging with losses of 0.6%.

IG chief market analyst Chris Beauchamp said while there may be a short-term bounce in stocks, it was highly unlikely this would be the end of 2022’s volatility.

“Efforts to build a sustainable base for a rally continue in equities, as an initial drop in US futures following the monthly US CPI figure is reversed and the opening hour of US trading sees some gains for embattled stock markets,” he said.

“To borrow a word, it is too soon to tell if the slowing of price growth is transitory or not, but slowing or not, 8.1% price growth is still far too hot for the Fed’s taste.”

Pantheon Macroeconomics chief economist Ian Shepherdson also said he did not expect the CPI data to change the Fed’s near-term outlook, with an interest rate of 50 basis points (bp) slated for next month.  

“The chance of a switch to 25bp in July probably now is less than we hoped, unless the May and June core prints are much lower,” Shepherdson said.

“Bear in mind too that the next few months also will bring clear evidence of the housing rollover and softer manufacturing numbers too, and payroll growth probably will slow a bit. A 25 in July is not dead.”

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9:40am: US stocks dip after release of hotter-than-expected inflation data

US stocks slipped into the red shortly after the open on Wednesday as investors digest the latest US inflation data and how this will inform further interest rate rise decisions by the Fed.

Headline inflation increased 8.3% year-over-year in April, slightly less than the 8.5% annual increase reported in March but higher than the consensus analyst expectation of 8.1%. 

Just after the open, the Dow had shed 164 points at 31,997 points.

The S&P 500 was down 27 points at 3,974 points and the Nasdaq lost 170 points at 11,567 points.

Tilney Smith & Williamson investment strategist Sarah Giarrusso said the decline in the annual rate of inflation marked a long-awaited and crucial moment for policy makers and investors alike.

“As such, it does little to change the expected course of interest rate increases. Money markets are expecting interest rates to reach over 2.5% by the end of 2022 from 1% currently,” Giarrusso said

“The US equity market is still adjusting to a hawkish Fed as growth stocks, which are more sensitive to rising interest rates, continue to underperform their value counterparts.”

“The course for interest rates is likely to continue on an upward trajectory and therefore we remain in favour of value over growth in equity markets.”

Markets.com chief market analyst Neil Wilson said the latest data showed US CPI was broadening not peaking, with signs that more areas were contributing to the rise.

“Does it really change what the Fed does? I don’t think one hot CPI print makes a summer,” Wilson said.

“But the core reading has spooked lots of folks who had got the wrong side of this and had tried to second guess a softer reading than we got. Less peaking and more plateauing, higher for longer.”

8:40am: Latest figures show US inflation remains high

US headline inflation eased slightly in April to 8.3% year-over-year, according to the latest consumer price index (CPI) data released by the US Bureau of Labor Statistics this morning.

However, the CPI came in higher than the analyst consensus expectation of 8.1%. 

The data indicates that while inflation remains high it may have peaked, with April reporting a smaller increase than the 8.5% jump reported in March which was the fastest annual gain since December 1981.

In an initial comment, AvaTrade chief market analyst Naeem Aslam said the reality was that serious measures were needed to cool inflation, otherwise “stagflation is here.”

“The month-on-month CPI number is really a blow out number which no one expected, and this has crushed the confidence among traders now,” Aslam said.

“The gold price has also crushed as traders are betting that the Fed will increase the rate much faster than anticipated.”

Aslam noted that the numbers suggested that not only the Fed would need to do more to control inflation, but also the Biden administration.

6.30am: Stocks seen opening higher  

US markets are expected to open higher as investors eye key inflation data – scheduled for release before the start of trade – that are likely to shape the extent of the Federal Reserve’s future interest rate hikes.

Futures for the Dow Jones Industrial Average gained 0.78% in Wednesday pre-market trading, while those for the broader S&P 500 index rose 0.96% and the Nasdaq added 1.1%.

Markets ended mixed on Tuesday, a day after the worst day for global stocks since June 2020, as shares of technology companies regained some lost ground. 

The Nasdaq finished 1% higher at 11,738 after sinking 4.3% on Monday. The S&P 500 eked out a 0.25% gain to end at 4,001 but the Dow lost 0.26% to close at 32,161.

“Markets have begun to stabilise over the last 24 hours following Monday’s rout, but there’s no doubt that risk appetite is still very subdued as worries about a potential recession gather pace,” commented Jim Reid, chief credit strategist at Deutsche Bank. 

April’s consumer price index (CPI) is expected to show year-on-year inflation of 8.1%, with a month-on-month increase of 0.2%. March’s reading of 8.5% was the fastest annual gain since December 1981. The report is due for release at 8:30am Eastern Time.  

“This will be a very important one for markets and the Fed, since although policymakers have strongly signalled that they’re inclined to continue hiking by 50bps (basis points) at the next couple of meetings, there is still 25/50/75bps to play for after those meetings,” Reid added. “Today’s report will help shape the early read into this and has an ability to move markets in a large manner if diverging from consensus too far.”