NEW YORK (UPI) — U.S. stocks stabilized Wednesday right before the close in an up-and-down trading session following the biggest single-day sell-off in more than two years. After dropping more than 200 points during the final hour of trading, the Dow Jones Industrial Average finished the day up 30.12 to close at 31,135.09. The NASDAQ rose 0.7%, while the S&P 500 added 0.3%.
Energy stocks were mostly up with Chevron gaining 2.4%. Johnson & Johnson also fared well ending the session up 2.1% after the company announced it would buy back up to $5 billion in stock.
Wednesday’s modest gains came one day after the Dow lost nearly 4%, plummeting 1,276 points. The massive sell-off was triggered by August’s consumer price index report that showed inflation rose 0.1% over the previous month. Tuesday was the worst day for all three major averages since June of 2020.
“This CPI report put cold water on a building market narrative that a potential easing in inflation data could provide the Federal Reserve cover to ease up on its aggressive tightening campaign,” wrote Keith Lerner, chief market strategist at Truist Advisory Services, in a note to clients early Wednesday. “This report will keep the Fed squarely focused on enemy number one — inflation.”
Wednesday’s rebound also came hours after the Labor Department released another inflation indicator showing wholesale prices fell 0.1% in August after tumbling 0.4% the month before. The producer price index, which indicates the prices producers receive for goods and services, matched what Dow Jones economists expected for the month.
“Prices for diesel fuel, jet fuel, chicken eggs, primary basic organic chemicals, and home heating oil also declined,” the Labor Department said. “In contrast, the index for construction machinery and equipment increased 2.6%. Prices for beverages and beverage materials and for electric power also rose.”
Despite the more positive PPI report, economists warn the disappointing CPI report that sparked Tuesday’s massive sell-off shows uncertainty over inflation will continue to dominate Wall Street.
“Tuesday’s selloff is a reminder that a sustained rally is likely to require clear evidence that inflation is on a downward trend,” Mark Haefele, CIO of UBS Global Wealth Management, said in a note to clients. “With macroeconomic and policy uncertainty elevated, we expect markets to remain volatile in the months ahead.”