After the inflation numbers, the S&P 500 and Dow are up, but the Nasdaq is down on fears of rising rates

After the inflation numbers, the S&P 500 and Dow are up, but the Nasdaq is down on fears of rising rates

The so-called core CPI increased 6.2% in the 12-months through April after a 6.5% jump in March, which was largest gain since August 1982. “It was the core number that gave people pause. It was a little higher but was it anything dramatic? Not really. Last month was way below what people expected,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

In tumultuous trading on Wednesday, the S&P 500 and Dow rose as banks and energy stocks surged, but the tech-heavy Nasdaq fell as inflation data confirmed predictions of rapid interest rate hikes. The consumer price index (CPI) rose 0.3 percent last month, the weakest increase since August, but still higher than economists’ expectations of a 0.2 percent increase. The monthly increase in inflation was substantially lower than the 1.2 percent increase in March, which was the highest since September 2005.

“At the end of the day we can get all excited about whether it is a little higher or a little lower, but clearly the year-on-year inflation rate rolled over and looks like it peaked in March. It seems to have turned the corner.” Eight of the 11 major S&P sectors advanced. Energy gained 3.5% as oil prices jumped 5% buoyed by supply concerns.

Cyclical sectors such as materials rose 1.8%, while financials and industrials added 1.1% and 0.7%, respectively. Banks climbed 1.2%. “It is speculation but it is driven on the perception of what rates are going to do. So if the Fed is not as aggressive down the line, investors are taking a shot that the economy is going to be okay, rates are not going to have that upside pressure,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

“It is more of a very short-term move in the cyclicals … the market is trying to maneuver and jockey around what the Fed is going to do.” However, the prospect of rising interest rates dented growth stocks, with megacap companies such as Amazon.com, Microsoft Corp, Apple Inc, Meta Platforms and Tesla Inc down between 1.4% and 2.5%.

The S&P 500 growth index slipped 0.6% as compared to a 1% rise in its value counterpart on Wednesday. The S&P 500 has fallen more than 15% and the Nasdaq over 25% so far this year as concerns around Fed policy moves, the Ukraine war and the latest coronavirus lockdowns in China have deepened worries of faltering global economic growth.

At 12:14 p.m. ET, the Dow Jones Industrial Average was up 196.93 points, or 0.61%, at 32,357.67, the S&P 500 was up 14.99 points, or 0.37%, at 4,016.04, and the Nasdaq Composite was down 78.96 points, or 0.67%, at 11,658.71. Coinbase Global Inc slid 22.3% after its first-quarter revenue missed estimates amid a turmoil in global markets which has curbed investor appetite for risk assets.

Advancing issues outnumbered decliners by a 2.08-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.12-to-1 ratio on the Nasdaq. The S&P index recorded one new 52-week highs and 49 new lows, while the Nasdaq recorded 10 new highs and 793 new lows.

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