US equity indexes made gains after midday on Wednesday, highlighted by the Nasdaq Composite achieving a new intraday record high. This spike followed the release of November's inflation print, which revealed signs of weakness in certain persistent areas. The S&P 500 climbed 0.9% to close at 6,090.4, while the Nasdaq Composite shot up 1.8% to reach 20,036.5.
The Dow Jones Industrial Average recorded a modest increase of 0.1%, ending at 44,303.1 by midday. Notably, sectors such as communication services, consumer discretionary, and technology were the leading gainers during the session. In contrast, healthcare took the lead among decliners. The Bureau of Labor Statistics reported a rise in the consumer price index (CPI) of 0.3%, a slight increase from the 0.2% observed over the previous four months.
Year-over-year, inflation accelerated to 2.7%, up from the 2.6% pace of October. Both statistics were consistent with projections based on a Bloomberg survey. Core CPI, which excludes volatile food and energy prices, remained steady at 0.3%. On an annual basis, it registered at 3.3%, mirroring consensus estimates. The pressure on prices was largely attributed to discretionary items, such as motor vehicles, accommodations like hotels, and airfares.
Oxford Economics noted a softening within the more persistent inflation components, including shelter, suggesting that the 'disinflationary trend has room to run'. Gold experienced a 1.4% increase, rising to $2,755.32 an ounce, while silver rose by 0.7%, reaching $32.97 an ounce. Market expectations for monetary policy in light of the inflation data remained unchanged. The likelihood of a quarter-point interest rate cut in the upcoming Federal Reserve meeting surged to approximately 95% by Wednesday afternoon, up from 89% the previous day, as indicated by CME Group's FedWatch tool. US Treasury yields presented a mixed picture intraday, with the 10-year yield increasing by 2.9 basis points to 4.25%, while the two-year yield fell slightly, less than one basis point, to 4.14%. While a rate cut by the Fed on December 18 seems assured, the market does not appear to anticipate significant easing in the following year.
The FedWatch Tool suggests that the most likely scenario in a year’s time will see interest rates between 3.75% to 4%, remaining close to the current range of 4.5% to 4.75%, unchanged day-over-day, week-over-week, and month-over-month. Thomas Feltmate, a senior economist at TD Economics, commented, 'The November CPI report provided further evidence that inflation progress is becoming much more incremental, suggesting that the Federal Reserve's fight to return to 2% inflation is far from over.' Considering the incoming Trump administration's policy proposals, which could introduce tariffs and tax cuts that may exert further inflationary pressures, the Fed is likely to exercise caution and slow the pace of rate cuts into 2025, Feltmate pointed out. In corporate news, Apple ($AAPL) is collaborating with Broadcom ($AVGO) to develop its inaugural server chip specifically tailored for artificial intelligence, according to a report from The Information, citing three sources familiar with the initiative.
This news resulted in a 5.6% intraday surge in shares of Broadcom, positioning it among the top performers on both the S&P 500 and Nasdaq indexes. Meanwhile, China’s foremost markets watchdog is urging executives at PDD Holdings ($PDD) to amend its refund policy, as reported by Bloomberg News, leading to a 2% drop in PDD shares, marking it as the second-largest decliner on the Nasdaq during the trading session. West Texas Intermediate crude oil futures surged by 1.8%, closing at $69.85 per barrel..