Wall Street holds firm after latest inflation data comes in as expected

NEW YORK — Wall Street is holding relatively steady Wednesday after the latest update on inflation came in almost exactly as economists expected.

The S&P 500 was edging up by 0.1% in early trading, coming off one of its best days of the year. The Dow Jones Industrial Average was up by 11 points, or less than 0.1%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.1% higher.

Treasury yields were also relatively firm in the bond market after initially wavering immediately after the U.S. government said consumers paid prices that were 2.9% higher overall for gasoline, food, shelter and other items last month than a year earlier.

The data should keep the Federal Reserve on track to cut its main interest rate at its next meeting in September, a move that Wall Street has been looking forward to for years. The Fed has been keeping rates at an economy-crunching level in hopes of stifling inflation that topped 9% two years ago, and lower rates would ease the pressure on both the economy and on prices for investments.

The only question is how big the first cut to rates since the 2020 COVID crash will be: the traditional quarter of a percentage point or a more dramatic half point?

Wednesday’s reading on inflation at the consumer level wasn’t as cool as the prior day’s update on inflation at the wholesale level, but it likely doesn’t change much, according to Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley.

If most of the data over the next few weeks points to a slowing economy, he said the Fed may cut more aggressively. That includes a report coming up Thursday about how much U.S. shoppers spent at retailers.

While the economy is still growing, and many economists see a recession as unlikely, worries have risen about its strength after a much worse-than-expected month of hiring by U.S. employers in July.

The yield on the 10-year Treasury edged down to 3.84% from 3.85% late Tuesday. It’s been coming down since topping 4.70% in April, as expectations have built for coming cuts to rates. The two-year yield, which more closely tracks expectations for the Fed, rose to 3.96% from 3.94% late Tuesday as traders weigh whether September’s anticipated cut will be the traditional or jumbo-sized move.

On Wall Street, Kellanova rose 7.4% after Mars said it would buy the company behind Pringles, Cheez-Its and Kellogg’s for $83.50 per share in cash. The companies put the deal’s total value at $35.9 billion, including debt. Kellanova was created when the Kellogg Co. split into three companies in the summer of 2022.

In stock markets abroad, indexes were mixed across Europe and Asia.

Japan’s Nikkei 225 has been the center of financial markets’ wildest action in recent weeks, but it rose a relatively modest 0.6% following a day of ups and downs. Speculation is rife that Japan’s governing Liberal Democratic Party will turn to a younger politician as the next leader.

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AP Business Writers Yuri Kageyama and Matt Ott contributed.