S&P 500, Nasdaq inch up after soft PPI data, focus on Fed verdict

By Shristi Achar A and Johann M Cherian

(Reuters) – The benchmark and the Nasdaq gained on Wednesday as fresh data indicated inflation pressures were easing ahead of the Federal Reserve’s final policy decision of the year, where it is widely expected to leave interest rates unchanged.

The Labor 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 estimates of a 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.

The upbeat sentiment led Wall Street’s main indexes to close at fresh 2023 highs on Tuesday.

“The numbers are more or less in line with expectations and continue to show that inflation is headed in the right direction,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

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

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 possible monetary easing next year, estimating a nearly 80.7% chance of at least a 25-basis-point rate cut in May 2024, according to the CME’s FedWatch tool.

Meanwhile, nearly $5 trillion in U.S. 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 (NYSE:) dropped 9.6% to a 10-year low, after the drugmaker forecast 2024 revenue below Wall Street’s expectations.

Eight of the S&P 500’s 11 major sectors advanced, though the materials sector shed 0.7%, as base metal prices declined. [MET/L]

At 9:46 a.m. ET, the was down 34.31 points, or 0.09%, at 36,543.63, the S&P 500 was up 2.49 points, or 0.05%, at 4,646.19, and the was up 37.17 points, or 0.26%, at 14,570.57.

Among other stocks, Tesla (NASDAQ:) slipped 1.1% after the automaker said it would recall more than two million vehicles in the U.S. fitted with its Autopilot system. The company will also lose up to $7,500 in federal tax credit for some Model 3 vehicles.

Southwest Airlines (NYSE:) slipped 4.9% after the carrier raised its forecast for fourth-quarter fuel costs.

Johnson & Johnson (NYSE:) limited gains on the blue-chip Dow, shedding 1.7% after Wells Fargo downgraded the drugmaker to “equal weight” from “overweight”.

Take-Two (NASDAQ:) Interactive Software added 3.2% as the video-game maker is set to be included in the , effective December 18.

Advancing issues outnumbered decliners by a 1.02-to-1 ratio on the NYSE and by a 1.06-to-1 ratio on the Nasdaq.

The S&P index recorded 42 new 52-week highs and one new low, while the Nasdaq recorded 61 new highs and 64 new lows.