Stocks Mixed on Wall Street as Investors Look for Fed’s Next Move on Interest Rates
Stocks on Wall Street were mixed in morning trading on Friday as investors reviewed reports on inflation and consumer sentiment for clues about the Federal Reserve’s next move on interest rates. The S&P 500 was down 0.2% after wavered between small gains and losses throughout the morning. This marks the benchmark index’s second losing week in a row. Meanwhile, the Dow Jones Industrial Average was up 0.2% at 35,254 points, and the Nasdaq composite was 0.6% lower due to a pullback in big tech companies.
Early in the trading session, stocks lost ground following the release of the Labor Department’s report on wholesale prices, which showed a 0.8% increase in the producer price index. This modest increase could give ammunition to the hawkish wing of the Federal Reserve, which may advocate for another rate hike before the Fed believes it has reached its terminal rate. Bond yields mostly rose in response to the report, with the two-year Treasury yield climbing to 4.86%. The 10-year Treasury yield rose to 4.13%, which helps set rates for mortgages and other important loans.
These reports on wholesale prices follow Thursday’s release of the consumer price index, which showed that U.S. consumers paid prices that were 3.2% higher in July than a year earlier. This is slightly below economists’ expectations and significantly lower than last summer’s peak above 9%. The moderating pace of price increases, combined with a resilient job market, has raised hopes that the Federal Reserve may achieve a “soft landing” by raising rates enough to slow borrowing and tame inflation without causing a painful recession.
However, critics argue that Wall Street may have formed a consensus too quickly that inflation is continuing to cool, and that the economy will avoid a recession. The Federal Reserve has already increased rates to their highest level in more than two decades. The central bank has stated that its upcoming decisions on rates will be based on data reports, particularly those on inflation and the job market.
Investors also weighed a preliminary reading in a University of Michigan survey, which showed consumer sentiment slightly down from July. The latest consumer sentiment index was 71.2, below analysts’ consensus forecast. The survey also found that consumer expectations for inflation in the coming year decreased, which aligns with the Federal Reserve’s goal of avoiding a vicious cycle where expectations for high inflation drive behavior that worsens it.
Aside from economic data, investors also kept an eye on quarterly earnings reports. Quantum computing technology company IonQ saw its stock jump by 20.9% after raising its full-year guidance and beating Wall Street’s revenue forecasts. Bakery goods maker Flowers Foods also saw a 3% increase in its stock price after reporting better-than-expected quarterly earnings and revenue. On the other hand, primary care medical center chain Cano Health experienced a 67.1% drop in its stock price after falling short of Wall Street’s estimates and expressing concerns about its current liquidity.
Looking ahead, several major retailers are scheduled to report their quarterly results next week, including Home Depot, Target, and Walmart. In the global stock markets, European indexes declined while Asian indexes were mixed.
Analyst comment
Positive news: Quantum computing technology company IonQ saw its stock jump by 20.9% after raising its full-year guidance and beating revenue forecasts.
Negative news: Primary care medical center chain Cano Health experienced a 67.1% drop in its stock price after falling short of estimates and expressing liquidity concerns.
Neutral news: Wall Street stocks were mixed as investors reviewed reports on inflation and consumer sentiment for clues about the Federal Reserve’s next move on interest rates.
