Stocks swung between gains and losses on Wednesday after new data showed inflation eased slightly in April, but not as much as economists expected.

The S&P 500 edged up 0.9% in morning trade. The index ended a three-day losing streak on Tuesday, marking a pause on a period of pressure that came as investors braced for the Federal Reserve to continue raising interest rates to curb inflation, which has been high for decades.

The Dow Jones Industrial Average gained 0.8% and the technology-focused Nasdaq Composite rose 0.8%.

The yield on 10-year Treasury bills – which underpins borrowing costs across the economy – fell to 2.987% from 2.990%, retracing an earlier rise. Yields and bond prices move in opposite directions.

The consumer price index rose 8.3% in April from the same month a year ago, decelerating from an annual rate of 8.5% in March but above the 8.1% expected by economists. The decline in annual inflation last month marks the first monthly easing in price increases since August 2021.

Investors hoping for a definitive sign that inflation is peaking may have been dismayed by the higher-than-expected reading, said Michael Farr, chief executive and founder of Farr, Miller & Washington.

“The bandage is still slowly coming off,” Mr. Farr said. “According to the Fed, we are not near the end of this process that everyone wants to end.

The trajectory of inflation and wages will determine how much the Fed raises interest rates at its next policy meeting. Last week the central bank raised rates by half a percentage point, the biggest hike since 2000, and approved a plan to reduce its asset portfolio by $9 trillion, giving a boost to its campaign to contain inflation at its highest level in 40 years.

“What we saw this morning was mostly in line with expectations, at least my expectations,” said David Kotok, chief investment officer at Cumberland Advisors. Inflation appears to be peaking, he said. Still, volatile markets were poised to react strongly to any headline hinting at lingering price pressures. “We’re in these kind of crazy times,” he said.

Stocks, particularly in the United States, have been hit by a wave of selling in recent weeks. Investors face the unraveling of the accommodative monetary policies that had boosted gains in stocks and bonds since the early days of the pandemic.

Shares of Coinbase Global fell 17% after the cryptocurrency exchange said its users declined of the previous quarter. Shares of Unity Software plunged 30% after the video game software developer widened its loss and gave a second-quarter revenue forecast that fell short of analysts’ expectations.

Switch rose 8.3% after the IT services company said it was being taken private by a consortium of investors.

Traders worked on the floor of the New York Stock Exchange on Tuesday.


Photo:

BRENDAN MCDERMID/REUTERS

The war in Ukraine, which has propelled inflation even higher by driving up commodity prices, and the Covid-19 lockdowns in China that threaten to damage the global economy, add uncertainty for investors. .

“If we only had policy rates up, or only high inflation, or only China or only Ukraine, we could probably handle that,” said Daniel Morris, chief market strategist at BNP Paribas Asset. Management. “But we have all of that simultaneously. This is why it is a particularly difficult environment.

Mr Morris said US stocks could come under further pressure, saying valuations had fallen to average levels having been historically expensive before the sell-off.

Oil prices rose slightly. Brent, the global benchmark, rose 3.5% to $106.02 a barrel.

Overseas markets were generally higher. The Stoxx Europe 600 gained 0.7%, driven by stocks of auto and property companies. In Asia, the Hong Kong Hang Seng gained 1% and the Shanghai Composite Index gained 0.8%.

Among individual European stocks, Swedish Match gained about 9% after it said its board agreed to a takeover by Philip Morris International,

valued at the equivalent of $16 billion. German industrial company Thyssenkrupp rose 12% after saying rising steel prices would support its profits for the rest of the year.

Write to Joe Wallace at [email protected]

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