U.S. stocks rebounded on Wednesday as investors digested the latest inflation figures and awaited more data on Thursday. The major indexes shook off earlier losses, with the Dow Jones Industrial Average finishing up 0.2%, the S&P 500 gaining 0.4%, and the Nasdaq Composite adding 0.7%.
Investor Focus Trains on Inflation Readings
The market’s attention remains fixed on inflation and the Federal Reserve’s response. Wholesale prices in the U.S. rose more than expected in September, with the producer price index climbing 0.4% from August and increasing 8.5% year-over-year.
This pace of wholesale inflation was the fastest since April and suggests that overall price pressures remain stubbornly high, despite the Fed’s repeated interest rate hikes this year.
The next key inflation report arrives Thursday, with the September consumer price index data on deck. Economists predict consumer inflation likely slowed slightly from the prior month but remained elevated at 8.1% annually.
With inflation still untamed, the Fed is nearly certain to issue another large 0.75 percentage point rate hike at its November meeting, according to trading in federal funds futures contracts. The CPI figures will provide crucial context on whether the Fed might slow its pace of hikes after November or continue an aggressive stance into next year.
Treasury Yields Retreat After Hitting Multi-Year Highs
In the bond market, Treasury yields pulled back after surging to multi-year peaks last week. The 10-year Treasury yield dipped below 4.6% on Wednesday, down from over 4.9% last week, which was the highest level since 2007.
The sharp bond selloff paused as investors weighed recession risks and moderating oil prices, which could bring some relief on the inflation front. However, bond yields remain well above levels from earlier this year and are still pricing in additional Fed rate hikes.
Many investors now expect the Fed to forego another 0.75 point increase in December, given the tightening impact already exerted by higher yields and financial conditions. But the path beyond December remains murky and dependent on the inflation outlook.
All Eyes on Fed Minutes for Rate Hike Outlook
In addition to the CPI report, investors are also eagerly awaiting the minutes from the Fed’s September policy meeting on Wednesday afternoon. The minutes should provide color on how aggressive officials expect to be with rate hikes for the remainder of the year and into 2023.
The September decision brought the third consecutive 0.75 point increase, lifting the target fed funds rate range to 3% to 3.25%, the highest since 2008. The minutes may also offer clues on how high the Fed is willing to push rates and how long they might keep policy restrictive.
Oil Prices Decline as Recession Fears Mount
Meanwhile, oil prices resumed their slide, reflecting demand worries as the global economy slows. U.S. crude futures dropped below $84 per barrel, while international benchmark Brent dipped back near $86.
The pullback in crude came despite escalating geopolitical tensions, including Russia’s massive missile strikes across Ukraine this week. But fears of a worldwide recession are trumping supply concerns for now, weighing on energy prices.
Shares of oil giants like ExxonMobil and Chevron ticked lower in sync with crude markets. The energy sector had been a standout this year amid high oil and gas prices, but has recently declined as economic uncertainty grows.
Birkenstock Stumbles in NYSE Debut
In stock news, German footwear maker Birkenstock began trading on the New York Stock Exchange on Wednesday after completing a sale to private equity firm L Catterton. But the debut was rocky, with shares sliding more than 10% from the opening price of $75 to close below $67.
Birkenstock is known for its sandals and comfort shoes, which have gained popularity in recent years. The company was valued at around $4.5 billion in the L Catterton deal earlier this year. However, investors showed caution on the first day of trading amid a volatile market environment.
The lackluster kickoff follows a string of disappointing IPOs and could mean a cooling appetite for new offerings. Yet Birkenstock’s long-term growth story remains intact, anchored by brand strength and expanding global demand.