US stock markets close inconsistently - inflation data dampens interest rate expectations, tech stocks gain

US investors are eagerly watching the consumer price index, which indicates cooling inflation. Fears about interest rates are decreasing, and tech stocks in particular are posting profits. However, rising bond yields are putting a damper on the end of the day.

The US stock exchanges closed inconsistently in the middle of the week. Surprisingly weak inflation data dampened expectations of a further interest rate hike by the US Federal Reserve in October. The Dow Jones index of standard stocks closed 0.9 percent lower at 50,906 points. The broader S&P 500 fell 0.3 percent to 7,651 points. The index of the technology exchange Nasdaq rose by 0.2 percent to 26,861 points. All three indices were even higher in early trading.

For the past month, this resulted in a loss of 4.3 percent for the Dow and 0.4 percent for the S&P. The Nasdaq, on the other hand, rose by 1.9 percent. For the third quarter, the Dow recorded a decline of 2.7 percent, while the S&P increased by 2.0 percent and the Nasdaq by 2.5 percent.

The personal consumption expenditure (PCE) price index rose 3.4 percent on an annual basis in August. Economists polled by Reuters had expected 3.7 percent. Analysts pointed out that methodological changes in the calculation also contributed to the lower value. At the same time, economic growth (GDP) for the second quarter was revised upwards to an annualized rate of 2.2 percent thanks to strong consumer spending and investments in artificial intelligence (AI) infrastructure.

Headwinds from the bond market

The probability of a 25 basis point interest rate hike in October fell to around 37 percent, down from 51 percent the day before, according to the CME's FedWatch tool. However, headwinds came from the bond market, which depressed stock prices just before the close. Rising crude oil prices as a result of the US-Iran war and extremely high diesel costs fueled inflation concerns and drove up US Treasury yields. The market is watching to see whether the economy continues to grow and can absorb higher interest rates, said Anthony Saglimbene, chief market strategist at Ameriprise Financial. However, if interest rates remain at this high level for longer, this could weigh on economic growth or corporate profits. "Then you would see a very quick negative reaction from the market," he explained.

A look at the labor market showed a slight recovery. The private sector added 90,000 jobs in September, the ADP report showed. In August the increase was revised downwards to 36,000. The data is seen as a precursor to the government's eagerly awaited jobs report on Friday. Fed Governor Lisa Cook, meanwhile, stressed she was committed to reducing inflation without damaging the labor market. The price pressure has been too high for too long.

Among the individual stocks, large technology stocks were particularly in demand. Microsoft, Apple and Nvidia rose, making the tech sector the strongest of the day. Hewlett Packard Enterprise climbed 3.9 percent. The AI ​​server maker raised its long-term revenue forecast for its networking business and announced a $1.2 billion deal with Vultr. Moderna, on the other hand, slipped 5.3 percent after Citigroup downgraded the biotech company's shares to "Sell".