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Shares rise as investors look forward to key consumer inflation data

PPI data shows inflation slowdown still in early days, says JPMorgan's Santos

Stocks rose on Wednesday as investors shrugged off inflation data that came in higher than expected and looked ahead to a key consumer report that will inform the pace of Federal Reserve rate hikes going forward.

The Dow Jones Industrial Average gained 151 points, or 0.52 percent. The S&P 500 rose 0.38%, boosted by a 10% jump in shares of Modern, the top winning stock in the index. The Nasdaq Composite ticked up 0.39 percent.

Shares bounced between gains and losses earlier in the morning as the September producer price index, a measure of final demand wholesale prices, came in higher than expected. Printing was up 0.4% in September, more than the consensus estimate of a 0.2% increase, according to Dow Jones.

The PPI figure is one of the inflation measures investors watch along with the Federal Reserve. If inflation remains high, the central bank is more likely to continue its aggressive path of rate hikes to bring it back in check. This means that interest rates will continue to rise and may remain high for longer than the market expects, weighing on shares.

Investors will get more inflation data on Thursday, when the consumer price index report for September is published. The CPI figure is a measure of price changes in a basket of common consumer goods and services.

“Prices remain high, so it shouldn’t be a surprise to see producer goods and services rising. Keep in mind that the increase is still below what we saw consistently month after month earlier this year,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office. “No doubt the Fed still has its work cut out for them, and if tomorrow’s CPI reading is hot, don’t be surprised to see some investors come to understand how long the road to tempering inflation may be.”

The minutes from the Federal Reserve’s September meeting will also be published on Wednesday. While Fed Chairman Jerome Powell has acknowledged that aggressive rate hikes could be painful, the central bank will continue to move forward in the fight to lower inflation.

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