The Nasdaq rose on Friday as growth stocks ticked higher on lower Treasury yields, even though resilient core inflation added to worries of big interest-rate hikes denting a rise in consumer spending.
Rate-sensitive stocks including Tesla Inc, Meta Platforms, Alphabet Inc and Microsoft Corp edged higher between 0.1% and 1.7%, tracking a dip in the benchmark 10-year Treasury yield to a week’s low of 3.682%.
Data showed the core personal consumption expenditures price index jumped 0.6% after being unchanged in July. It climbed 4.9% on a year-on-year basis in August after increasing 4.7% in July.
“What we need to see is decreasing inflation on a sequential basis and we’re just not seeing that yet,” said Art Hogan, chief market strategist at B. Riley Wealth.
“This is not going to change that hawkish scenario that has been driving equities lower and why we’re getting the kind of reaction we’re seeing now.”
Fed funds futures showed traders see a nearly 68% chance of the U.S. central bank raising rates by 75 basis points at its November meeting, up from 61% odds before the inflation data.
The Federal Reserve’s aggressive stance on interest rate hikes have pushed all the three major indexes into bear market and set them for their third straight quarterly decline.
The Dow Jones Industrial Average was set for its worst month since pandemic lows. The S&P 500 has slumped 8.2% so far in September, testing its lowest level since November 2020, while the Nasdaq has lost over 9% during the month.
“It’s also quarter end and the market will potentially be impacted, whether it’s rebalancing or other kind of activity such as bonds versus stocks,” said Doug Fincher, portfolio manager at Ionic Capital Management.
Among the 11 major S&P 500 sector indexes, consumer discretionary stocks were the hardest hit as Nike Inc slid 10.64%.
The company warned of tightening margins, fueling concerns of an industry-wide drop in profit due to an inflation-induced hit to consumer sentiment.
Shares of Under Armour slipped 6.5%, while footwear retailer Foot Locker Inc dropped 3.9%.
Lower-than-expected quarterly revenue from Carnival Corp pushed its shares down 18.6%, highlighting that soaring prices forced consumers to cut discretionary spending such as cruise travel.
Fed Vice Chair Lael Brainard and San Francisco Federal Reserve Bank President Mary Daly backed the tough measures to bring down high inflation, with Brainard warning against premature rate cuts.
At 10:45 a.m. ET the Dow Jones Industrial Average was up 10.91 points, or 0.04%, at 29,236.52, the S&P 500 was up 13.86 points, or 0.38%, at 3,654.33 and the Nasdaq Composite was up 86.30 points, or 0.80%, at 10,823.80.
Advancing issues outnumbered decliners by a 2.60-to-1 ratio on the NYSE and by a 2.86-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week high and 49 new lows, while the Nasdaq recorded 10 new highs and 184 new lows.
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