Wall St edges up on cooling inflation, focus on Fed verdict

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Wall Street’s main indexes gained on Wednesday after new data indicated inflation pressures were easing, ahead of the Federal Reserve’s final monetary policy decision of the year, where it is widely expected to leave interest rates unchanged.

The Labour Department’s report showed the Producer Price Index (PPI) for final demand rose 0.9% on an annual basis in November.

Economists polled by Reuters had estimated a 1% advance.

On a month-on-month basis, producer prices were unchanged, against an estimated 0.1% increase.

The recent slew of reports, including the Consumer Price Index (CPI) data on Tuesday, have cemented expectations that interest rates have peaked, with traders also estimating potential rate cuts next year.

All eyes are now on the central bank’s interest-rate decision at the end of its two-day meeting, due at 2:00 pm ET.

Focus will also be on Fed Chair Jerome Powell’s comments after the policy announcement and the release of the “dot plot”, which could provide a glimpse into monetary policy trajectory.

“We don’t think they (Federal Reserve) will go from a tightening bias to an easing bias,” said Jim Smigiel, chief investment officer at SEI Investments.

“There would have to be a few meetings in between where Chair Powell would want to get the message across that they are now neutral, and we haven’t really seen that yet.”

Money markets have almost fully priced in the Fed holding rates at the current level of 5.25% to 5.50% later in the day.

Traders now see a possible monetary easing next year, estimating a nearly 78% chance of at least a 25-basis-point rate cut in May 2024, according to the CME’s Fed Watch tool.

Meanwhile, nearly $5 trillion in US stock options are due to expire on Friday, set to be the largest on record, which strategists said is likely to keep market volatility in check.

Pfizer dropped 9.6% to a 10-year low, after the drug-maker forecast 2024 revenue below Wall Street’s expectations.

However, the health sector gained 0.4% overall, buoyed by a 9.7% rise in Vertex Pharmaceuticals, after the drug-maker’s nerve-pain treatment succeeded in a mid-stage trial.

Tesla fell 3.2% as the automaker will lose up to $7,500 in federal tax credits for some Model 3 vehicles.

It also said it would recall more than two million vehicles in the US fitted with its Autopilot system.

At 11:34 am ET, the Dow Jones Industrial Average was up 18.73 points, or 0.05%, at 36,596.67, the S&P 500 was up 7.40 points, or 0.16%, at 4,651.10, and the Nasdaq Composite was up 20.62 points, or 0.14%, at 14,554.02.

Among other stocks, Southwest Airlines slid 5.8%after the carrier raised its forecast for fourth-quarter fuel costs.

Advancing issues outnumbered decliners by a 1.36-to-1 ratio on the NYSE and by a 1.14-to-1 ratio on the Nasdaq.

The S&P index recorded 56 new 52-week highs and one new low, while the Nasdaq recorded 91 new highs and 108 new lows.