(RTTNews) – After rising sharply at the start of the session, stocks continue to strengthen significantly in Wednesday afternoon trading. Major averages topped yesterday’s losses, with the Dow Jones and S&P 500 hitting three-month highs.
The major averages have moved roughly sideways over the past few trades, approaching their best levels for the day. The Dow is up 487.06 points or 1.5% at 33,246.47, the Nasdaq is up 324.46 points or 2.6% at 12,818.39 and the S&P 500 is up 80 .59 points or 2% at 4,203.06.
Wall Street‘s early rally reflected a positive reaction to a highly anticipated Labor Department report on consumer price inflation, which showed prices were unexpectedly flat in July.
The Labor Department said its consumer price index was unchanged in July after jumping 1.3% in June. Economists expected consumer prices to rise 0.2%.
Compared with the same month a year ago, consumer prices in July rose 8.5%, reflecting a larger than expected slowdown from the 9.1% peak in June.
The annual rate of price growth is expected to slow to 8.7% from the four-decade high recorded the previous month.
Meanwhile, the report said core consumer prices, which exclude food and energy prices, rose 0.3% in July after rising 0.7% in June. Core prices are expected to increase by 0.5%.
The annual rate of growth in core consumer prices remained unchanged at 5.9%, while economists had expected an acceleration to 6.1%.
Weaker-than-expected inflation data has led to speculation that the Federal Reserve will slow the pace of interest rate hikes at its September meeting.
CME Group’s FedWatch tool currently indicates a 58.5% chance of a 50 basis point rate hike and a 41.5% chance of a 75 basis point rate hike.
“Today’s inflation report could lead the Fed to scale back its rate hikes to 50 basis points in September,” said Kathy Bostjancic, chief financial economist at Oxford Economics.
She added: “However, we still think 75 basis points is likely given the lingering inflationary pressures, still-high inflation numbers and still-tight labor market driving strong wage gains.”
Computer hardware stocks showed substantial upward movement during the day, rebounding strongly from the sharp pullback seen in the previous session.
Reflecting the sector’s strength, the NYSE Arca Computer Hardware Index jumped 4.2% to its best intraday level in two months.
Significant strength also remains visible among airline stocks, with the NYSE Arca Airline Index surging 4%.
Interest-rate-sensitive housing inventories also continued to show strong performance, driving a 3.7% jump in the Philadelphia housing sector index.
Semiconductor, chemical and banking stocks are also seeing considerable strength on the day, advancing along with most other major sectors.
In overseas trading, stock markets in the Asia-Pacific region were mostly down in Wednesday’s trading. Japan’s Nikkei 225 index fell 0.7%, while Hong Kong’s Hang Seng index plunged 2%.
Meanwhile, major European markets traded higher on the day. While the German DAX index jumped 1.2%, the French CAC 40 index climbed 0.5% and the British FTSE 100 index rose 0.3%.
In the bond market, Treasuries have retreated well from their early highs but remain positive. As a result, the yield on the benchmark ten-year note, which moves opposite to its price, is down 3.6 basis points to 2.761%.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.