Stocks swing after inflation data, Harris-Trump debate

U.S. stocks saw big swings Wednesday as investors toggled between the Federal Reserve’s looming interest rate cut and the race for the White House following the high-stakes debate between Vice President Kamala Harris and former President Trump. 

The Dow Jones Industrial Average recovered a good portion of its 600-plus point drop by mid-afternoon, as did the broader S&P 500, while the Nasdaq Composite turned positive, rising over 1%. 

INVESTORS REACT POST TRUMP, HARRIS DEBATE

Tech stocks did the heavy lifting, the only S&P sector with gains, helped by the likes of chip stocks, including Nvidia, Intel and AMD, as well as Apple. Consumer staples, financials and energy remained laggards. 

INFLATION COOLED IN AUGUST AHEAD OF FED MEETING

The consumer price index for August showed prices continued to ease, rising 2.5%, the lowest since February 2021. Still, year-over-year prices for food remained elevated with eggs +28%, ground beef +4.9%, whole milk +3% and food away from home +4%, according to the U.S. Bureau of Labor Statistics. 

Traders dialed back expectations for a 50 basis point rate cut by the Federal Reserve next week to a mere 13%, while the odds of a 25 basis point cut stand at 87%, as tracked by the CME’s FedWatch Tool, which measures the probabilities of rate moves. Policymakers are expected to cut interest rates on Sept. 18 for the first time since March 2020. 

Big money center banks, which profit from higher interest rates, were mixed, including JPMorgan, Bank of America and Wells Fargo. 

The debate between Trump and Harris, on the Disney-owned ABC network, was contentious at times, but gave the vice president a boost. 

“When you look at the predicted order of odds in those betting markets, you did see Kamala Harris’ odds increase for a potential victory in November. Trump declining,” Adam Turnquist, chief technical strategist for LPL Financial, said during an appearance on “Mornings with Maria” on Wednesday. 

Energy stocks such as Chevron, ExxonMobil and Marathon Oil, which could benefit from a Trump win, declined. 

Trump Media and Technology Group, of which the former president is the largest stockholder, fell to a record low.

 Its market cap now sits at $3.3 billion, valuing Trump’s stake at $1.9 billion. Following the assassination attempt in July, his stake was worth over $5 billion.