NEW YORK (AP) — U.S. stocks drifted near their records after the latest inflation update boosted hopes that more help for the economy will arrive next month from another cut to interest rates. The S&P 500 ended little changed Wednesday. The Dow Jones Industrial Average edged up 0.1%, and the Nasdaq composite slipped 0.3%. Treasury yields were mixed after a report said the inflation that U.S. consumers felt last month was exactly as economists expected. That strengthened expectations that the Federal Reserve will cut interest rates for a third time this year in about a month and sent short-term Treasury yields lower.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — U.S. stocks are drifting near their records Wednesday after the latest inflation update boosted hopes that more help for the economy will arrive next month through a cut to interest rates.
The S&P 500 was 0.1% higher in late trading, coming off its first loss since a big rally erupted after Election Day last week. The Dow Jones Industrial Average was up 29 points, or 0.1%, with a little more than an hour remaining in trading, and the Nasdaq composite was 0.1% lower.
In the bond market, yields were mixed after a report said the inflation that U.S. consumers felt last month was exactly as economists expected. It accelerated to 2.6% from 2.4%, but an underlying measure called “core inflation” did not accelerate. Such core inflation can be a better predictor of future trends, economists say, and the as-expected number boosted expectations for help coming from the Federal Reserve.
“Bang in-line core inflation leaves the Fed on track to cut rates in December,” according to Lindsay Rosner, head of multi sector fixed income investing at Goldman Sachs Asset Management.
The Fed began cutting interest rates from their two-decade high in September to offer support for the job market, hoping to keep it humming after bringing inflation nearly all the way down to its target of 2%. It cut again earlier this month, and traders now see an improved probability of roughly 82% for a third cut at its meeting next month, according to data from CME Group.
Those expectations sent the yield for the two-year Treasury down to 4.28% from 4.34% late Tuesday. The yield on the 10-year Treasury, which also takes future economic growth into account, rose to 4.45% from 4.43% late Tuesday after paring an early loss.
The question is what will happen with rates in 2025. Prior forecasts published by the Fed implied it could keep cutting rates through next year. But Donald Trump’s victory in the presidential election may have scrambled such plans. Economists say his preferences for lower tax rates, higher tariffs and less regulation could ultimately lead to higher U.S. government debt and inflation, along with faster economic growth.
While lower interest rates can give a boost to the economy and to prices for investments, they can also give inflation more fuel.
Still, Wednesday’s data was reassuring for the market following a run of stronger-than-expected data on the economy, which could have signaled upward pressures on inflation.
“The market may be concerned that we are at an inflection point, with inflation potentially returning to an upward trajectory,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. “We see inflation modestly higher next year. We don’t think today’s CPI data will do much to the market.”
On Wall Street, Rivian Automotive jumped 13.4% after the electric-vehicle company gave more details about a joint venture it's entering with Volkswagen Group that they had previously announced. The deal’s total size could be worth up to $5.8 billion, which is more than the $5 billion the companies had previously said.
Spirit Airlines’ stock lost 59.2%. The airline said in a regulatory filing that it’s still trying to work out a deal to renegotiate the repayment of its debt. If it can reach an agreement, the airline said it could wipe out the company’s stockholders, but it could also protect employees and customers.
In stock markets abroad, Japan’s Nikkei 225 fell 1.7% after its wholesale inflation rate reached its highest level since July of last year. South Korea’s Kospi sank 2.6% after Samsung Electronics shares fell to their lowest level in over four years.
Indexes were modestly lower across much of the rest of Asia and Europe.
In the crypto market, bitcoin crossed above $93,000 as cryptocurrencies generally soared, before pulling back below $90,000 in afternoon trading. Trump has embraced cryptocurrencies and pledged to make his country the crypto capital of the world.
Dogecoin, a cryptocurrency that’s been a favorite of Tesla’s Elon Musk, also pulled back following an jump earlier in the day. Trump named Musk as one of the heads of a “Department of Government Efficiency,” or DOGE for short.
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AP Writer Zimo Zhong contributed.
