U.S. Stocks Turning In Lackluster Performance Following Consumer Price Inflation Data

(RTTNews) - Following the substantial rally seen over the course of the previous session, stocks are turning in a relatively lackluster performance during trading on Wednesday. The major averages have spent the day bouncing back and forth across the unchanged line.

Currently, the major averages are narrowly mixed. While the Nasdaq is down 24.52 points or 0.1 percent at 17,163.09, the S&P 500 is up 7.65 points or 0.1 percent at 5,442.08 and the Dow is up 93.58 points or 0.2 percent at 39,859.22.

The choppy trading on Wall Street comes after the Labor Department released its highly anticipated report on consumer price inflation in the month of July.

The Labor Department said its consumer price index rose by 0.2 percent in July after edging down by 0.1 percent in June. The modest increase by consumer prices matched expectations.

Core consumer prices, which exclude food and energy prices, also crept up by 0.2 percent in July after inching up by 0.1 percent in June. The uptick by core consumer prices was also in line with economist estimates.

Meanwhile, the report said the annual rate of consumer price growth slowed slightly to 2.9 percent in July from 3.0 percent in June. Economists had expected the pace of growth to remain unchanged.

The annual rate of core consumer price growth also slipped to 3.2 percent in July from 3.3 percent in June, in line with expectations.

While the slowdowns by the annual rates of price growth suggest the Federal Reserve is likely to lower interest rates next month, traders may feel the chances of a rate cut are already priced into the markets after yesterday's rally.

CME Group's FedWatch Tool is currently indicating a 56.5 chance the Fed will lower rates by a quarter point and a 43.5 percent chance of a half point rate cut.

"Investors and policymakers alike will find this report mostly good for markets and the economy," said Jeffrey Roach, Chief Economist for LPL Financial. "As inflation decelerates, the Fed can legitimately cut rates yet keep policy restrictive overall."

"Unless the global economy experiences another shock, the Fed will most likely cut rates by a quarter percent in September," he added. "The probability of the Fed cutting by a half percent is still elevated since investors are still somewhat skittish from recent events."

Traders may also be reluctant to continue making significant moves ahead of the release of a slew of U.S. economic data on Thursday, including reports on weekly jobless claims, retail sales and industrial production.

Sector News

Reflecting the lackluster performance by the broader markets, most of the major sectors are showing only modest moves on the day.

Brokerage stocks have shown a strong move to the upside, however, with the NYSE Arca Broker/Dealer Index climbing by 1.7 percent.

Notable strength is also visible among telecom stocks, as reflected by the 1.5 percent gain being posted by the NYSE Arca North American Telecom Index.

On the other hand, steel stocks are seeing significant weakness, dragging the NYSE Arca Steel Index down by 1.6 percent, while gold stocks have also moved to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index climbed by 0.6 percent, while China's Shanghai Composite Index slid by 0.6 percent.

Meanwhile, the major European markets have all moved to the upside on the day. While the French CAC 40 Index is up by 0.6 percent, the U.K.'s FTSE 100 Index is up by 0.4 percent and the German DAX Index is up by 0.3 percent.

In the bond market, treasuries are extending the recent upward trend following the latest inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.1 basis points at 3.814 percent.