U.S. Stocks Regain Ground After Early Sell-Off, Nasdaq Closes Slightly Higher

After moving sharply lower early in the session, stocks showed a notable recovery attempt over the course of the trading day on Wednesday. The major averages climbed well off their worst levels of the day, with the tech-heavy Nasdaq reaching positive territory.

The Nasdaq inched up 6.09 points or less than a tenth of a percent to 19,649.95 after tumbling by as much as 1.2 percent, but the Dow and the S&P 500 ended the day in the red.

The Dow slid 225.09 points or 0.5 percent to 44,368.56, while the S&P 500 fell 16.53 points or 0.3 percent to 6,051.97.

The early sell-off on Wall Street came following the release of a closely watched Labor Department report showing consumer prices in the U.S. increased by more than expected in the month of January.

The Labor Department said its consumer price index advanced by 0.5 percent in January after climbing by 0.4 percent in December. Economists had expected consumer prices to rise by 0.3 percent.

The report also said the annual rate of consumer price growth accelerated to 3.0 percent in January from 2.9 percent in December, while economists had expected the pace of growth to remain unchanged.

The bigger than expected monthly increase by consumer prices partly reflected a continued surge by energy prices, which shot up by 1.1 percent in January after spiking by 2.4 percent in December.

Excluding the jump by energy prices as well as a 0.4 percent increase by food prices, core consumer prices rose by 0.4 percent in January after inching up by 0.2 percent in December. Core prices were expected to increase by 0.3 percent.

The annual rate of core consumer price growth also ticked up to 3.3 percent in January from 3.2 percent in December. Economists had expected the pace of growth to slow to 3.1 percent.

The hotter than expected inflation data increased speculation the Federal Reserve will leave interest rates on hold for a prolonged period.

Fed Chair Jerome Powell noted during his congressional testimony on Tuesday that the central bank can “maintain policy restraint for longer” if inflation does not continue to move sustainably toward 2 percent.

“Today’s data reaffirms Powell’s decision to put rate cuts on the back burner for an extended period of time,” said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.

He added, “Overall, today’s inflation data should force market participants to re-think the Fed’s ability to cut rates this year, especially considering the rise in prices is likely unrelated to any tariff activity from the White House.”

The early selling pressure was partly offset by a report from Reuters indicating President Donald Trump is considering exemptions to the reciprocal tariffs he may announce as early as Thursday.

House Speaker Mike Johnson told Reuters the exemptions could include the automobile and pharmaceutical industries but admitted he is “not certain.”

Sector News

Oil producer stocks moved sharply lower over the course of the session, dragging the NYSE Arca Oil Index down by 2.9 percent.

The sell-off by oil stocks came as the price of crude oil plunged following the release of a report showing a bigger than expected weekly increase by U.S. crude oil inventories.

Significant weakness also remained visible among interest rate-sensitive housing stocks, as reflected by the 1.7 percent loss posted by the Philadelphia Housing Sector Index.

Natural gas, steel and commercial real estate stocks also saw notable weakness, while gold stocks showed a strong move to the upside despite a modest decrease by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index rose by 0.4 percent, while China’s Shanghai Composite Index advanced by 0.9 percent and Hong Kong’s Hang Seng Index surged by 2.6 percent.

The major European markets also moved to the upside on the day. While the German DAX Index climbed by 0.5 percent, the U.K.’s FTSE 100 Index increased by 0.3 percent and the French CAC 40 Index crept up by 0.2 percent.

In the bond market, treasuries moved sharply lower in reaction to the consumer price inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 10.0 basis points to 4.637 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to the latest U.S. economic data, including reports on weekly jobless claims and producer price inflation.

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