S&P 500, Dow Up After Inflation Data, Nasdaq Down On Rate Hike Worries

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The S&P 500 and the Dow rose in choppy trading on Wednesday as banks and energy shares gained, while the tech-heavy Nasdaq came under pressure after inflation data cemented expectations of aggressive interest rate hikes.

Ten of the 11 major S&P sectors advanced in morning trade. Energy gained 3.4% as oil prices jumped over 4% buoyed by supply concerns. [O/R]

Financials added 1.1% and banks climbed 1.5%, tracking the benchmark 10-year Treasury yield which climbed back above 3%. [US/]

However, the prospect of rising interest rates dented megacap stocks such as Amazon.com, Microsoft Corp, Apple Inc,Meta Platforms and Tesla Inc, which fell between 0.2% and 0.8%.

The Labor Department’s report showed consumer price index rose 0.3% last month, the smallest gain since August, but still above economists’ forecast of a 0.2% rise.

The monthly rise in inflation was much smaller compared to the 1.2% surge in March, the largest increase since September 2005, but traders are still pricing in a 77% chance of a 75-basis point hike next month. [IRPR]

“The data underscores that inflation and rising prices likely has not yet peaked,” said Greg Bassuk, chief executive at AXS Investments in Port Chester, New York.

“With supply chain concerns and a potentially more aggressive Federal Reserve policy, the likelihood of not only a U.S. but a global recession is definitely going to be weighing heavily on the markets.”

The war in Ukraine coupled with latest coronavirus lockdowns in China have deepened investor worries about faltering global economic growth.

At 10:14 a.m. ET, the Dow Jones Industrial Average was up 232.89 points, or 0.72%, at 32,393.63, the S&P 500 was up 21.84 points, or 0.55%, at 4,022.89, and the Nasdaq Composite was down 15.61 points, or 0.13%, at 11,722.06.

The Nasdaq held near an 18-month low hit earlier this week as investors dumped megacap growth stocks amid worries that rising rates will future cash flows.

Coinbase Global Inc fell 22.1% after first-quarter revenue missed estimates amid a turmoil in global markets which has curbed investor appetite for risk assets.

Advancing issues outnumbered decliners by a 2.26-to-1 ratio on the NYSE and a 1.09-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and 53 new lows, while the Nasdaq recorded 10 new highs and 751 new lows.