On Wednesday, U.S. equity indexes displayed a mixed performance during midday trading as the expectations of a substantial interest rate cut this month diminished significantly post the release of August's inflation data. The S&P 500 index saw a decrease of 0.3%, landing at 5,478.8, while the Dow Jones Industrial Average fell by 0.8% to reach 40,428.8.
In contrast, the Nasdaq Composite managed to rise by 0.4% to 17,098.6 after initially trading lower earlier in the day. The vast majority of sectors retreated intraday, with only technology showing resilience, whereas financials, energy, and consumer staples led the decline. In the broader economic landscape, the consumer price index (CPI) for August increased by 0.2%, maintaining the same rate as the previous month, according to the Bureau of Labor Statistics' report on Wednesday.
This uptick aligned with projections outlined in a survey conducted by Bloomberg. On an annual basis, inflation saw a marginal easing to 2.5% from July's rate of 2.9%, closely matching Wall Street's consensus expectations. Core CPI, a crucial measure that excludes volatile food and energy prices, experienced a month-over-month increase of 0.3% in August, surpassing both the previous month’s 0.2% gain and the 0.2% consensus expectation.
Over the past year, core CPI expanded by 3.2%, precisely aligning with analysts' forecasts, which was the same as the figure observed a year prior. Reflecting on housing trends, rents demonstrated acceleration for the second consecutive month, as highlighted in a note from the Wells Fargo Investment Institute.
This rise contributed to the 12-month rental inflation, marking its first increase since it peaked at 8.1% in April 2023, thereby obstructing improvements in core services and the overall core CPI inflation rates. According to a note from Scotiabank, U.S. core inflation showed a slight rise last month, concluding that the chances for a significant Federal Reserve rate cut appear to be diminishing.
The note stated, 'There is no compelling reason to implement a drastic cut next week as opposed to adhering to a gradual approach.' The likelihood of a substantial 50 basis-point cut during the upcoming Federal Reserve monetary policy meeting on September 18 sunk to 13% by Wednesday afternoon, down from 34% just a day prior, as per the CME Group's FedWatch Tool.
Conversely, the probability of a 25 basis-point reduction surged to 87%, compared to only 66% the previous day. In tandem with these developments, Treasury yields increased, with the 10-year yield adjusting upward by 1.5 basis points to 3.66%, and the two-year yield climbing by 2.6 basis points to reach 3.64%.
Notably, these yields were trading lower earlier in the day. Meanwhile, the price of West Texas Intermediate crude oil evidenced a notable rise, jumping 2.1% to $67.18 per barrel. On the corporate front, news emerged from the Netherlands indicating that ASML Holdings N.V. ($ASML) would require export licenses to provide China with software updates for microchip production equipment that is not currently under restrictions, as reported by Reuters citing a statement from the foreign ministry.
Following this announcement, shares of ASML rose by 4%, positioning the company among the top gainers on the Nasdaq..