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Fabrice Cabaud

Major market averages turned lower in Wednesday afternoon trading as August’s Producer Price Index report contracted as forecasted. Stocks are swinging between gains and losses after Tuesdays sell-off that was sparked by a higher-than-expected CPI report.

The Nasdaq Composite (COMP.IND) is +0.2%, the S&P 500 (SP500) is -0.1%, and the Dow (DJI) is -0.3%.

Producer Price Index data fell for its second straight month, as it slid 0.1% month-over-month for August following a 0.4% drop in July. Moreover, the PPI reading came in line with the market consensus.

Rates remain little changed following Tuesday’s surge. The 10-year Treasury yield (US10Y) has dipped by 1 basis point to 3.41% and the 2-year yield (US2Y) is up 3 basis points to 3.78%.

The dollar index pared back some of its gains as it is lower by 0.20%.

Among the S&P sectors 7 of the 11 are in the red, led lower by Real Estate and Materials.

In response to the hot CPI print, BofA analysts put out a note that stated: “We expect the Fed to raise its policy rate by 75bp in September to 3.0-3.25% and project the target range for the federal funds rate to reach 3.75-4.0% by year-end. This would be 50bp higher than in June. We also look for the median member to project one additional 25bp hike in 2023, bringing the new terminal rate to 4.0-4.25%.”

Wells Fargo on the other hand outlined: “A 75bp (or better) September hike is baked into expectations, and we believe this will be the last 75bp hike for some time.”

“In all, we believe we are at peak hawkishness and inflation.”

Time will tell where markets go from here. Alliance Bernstein however remains bearish on the market outlook as the global asset management firm said in a note: “We believe this bear market has more room to run.”

Among active stocks, shares of Nucor Corporation drift lower as steel mill margins weigh heavy on its Q3 forecast.

Image and article originally from seekingalpha.com. Read the original article here.

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