U.S. Stocks Close Mixed Following Consumer Price Inflation Data

(RTTNews) - Stocks showed a lack of direction over the course of the trading session on Wednesday, with the major averages bouncing back and forth across the unchanged line as traders digested a highly anticipated report on consumer price inflation.

The major averages eventually ended the session mixed. While the Dow dipped 70.46 points or 0.2 percent to 34,575.53, the S&P 500 inched up 5.54 points or 0.1 percent to 4,467.44 and the Nasdaq rose 39.97 points or 0.3 percent to 13,813.59.

The choppy trading on Wall Street came following the release of the Labor Department's report on consumer price inflation in the month of August.

The report said the consumer price index climbed by 0.6 percent in August after inching up by 0.2 percent in July. The increase matched expectations.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in August after edging up by 0.2 percent in July. Economists had expected another 0.2 percent uptick.

The Labor Department also said the annual rate of consumer price growth accelerated to 3.7 percent in August from 3.2 percent in July. The annual rate of growth was expected to accelerate to 3.6 percent.

Meanwhile, the report said the annual rate of growth by core consumer prices slowed to 4.3 percent in August from 4.7 percent in July, in line with economist estimates.

While the data reinforced expectations the Federal Reserve will leave interest rates unchanged next week, many economists feel the slightly bigger than expected monthly increase in core prices leaves the door open for another rate hike before the end of the year.

"We expect Fed officials to look past the rise in headline CPI, but the uptick in the core CPI is reminder that the risks remain tilted toward additional rate hikes," said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

Following the report, CME Group's FedWatch Tool is indicating a 97.0 percent chance the Federal Reserve will leave interest rates unchanged next week.

The outlook for November remains more mixed, however, with the FedWatch Tool indicating a 58.0 percent chance rates will remain unchanged and a 40.8 percent chance of another quarter point rate hike.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Airline stocks showed a substantial move to the downside, however, with the NYSE Arca Airline Index plunging by 3.3 to a four-month closing low.

America Airlines (AAL) led the sector lower, plummeting by 5.7 percent after lowering its third quarter earnings guidance due to higher fuel costs and expenses related to a new labor agreement.

Significant weakness was also visible among oil service stocks, as reflected by the 2.2 percent slump by the Philadelphia Oil Service Index. The index pulled back off its best closing level in over four years as the price of crude oil gave back ground after reaching a ten-month high.

Housing and commercial real estate stocks also showed notable moves to the downside on the day, while considerable strength was visible among utilities stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index dipped by 0.2 percent, while China's Shanghai Composite Index slid by 0.5 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index closed just below the unchanged, the French CAC 40 Index and the German DAX Index both fell by 0.4 percent.

In the bond market, treasuries moved modestly higher over the course of the session after seeing initial weakness. Subsequently, the yield on the benchmark ten-year note, dipped 1.5 basis points to 4.249 percent after reaching a high of 4.344 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to a slew of U.S. economic data, including reports on weekly jobless claims, retail sales and producer price inflation.