Market snapshot: tech to the rescue

Technology stocks rescued the day Wednesday after an earlier inflation report had put the skids under share prices on Wall Street.

The Consumer Price Index core reading, excluding volatile food and energy prices, came in slightly higher than expected, rising by 0.3% on the month compared to forecasts of 0.2%. With housing prices remaining stubbornly high, the overall news was taken as confirmation that a 0.5% cut in interest rates by the Federal Reserve next week is now finally off the table, with a 90% likelihood that there will nonetheless be a 0.25% reduction.

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More optimistic investors had been hoping for a larger cut, and were therefore disappointed by the reading. Even so, the Fed continues to walk a tightrope between the labour market and inflation, and is arguably now under less pressure to ease monetary policy aggressively. Several smaller reductions now seem more likely over the next few calendar months depending on subsequent data.

However, markets staged a strong turnaround to finish the day higher, led mostly by a resurgence of buying in mega cap technology stocks. NVIDIA Corp (NASDAQ:NVDA) shares rose by more than 8%, while there were gains of between 2% and 3% for the likes of Microsoft Corp (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN). Elsewhere, there was also some interest in the banking sector, which for the most part finished ahead after a shaky start to the trading session.

Attention will now turn to today’s Producer Price Index, which is expected to show an annual increase of 1.8% as compared to 2.2% in July. In the meantime, the main indices have regained some poise in what has already been a relatively volatile month, with the Dow Jones having risen by 8.4%, the Nasdaq by 15.9% and the S&P500 by 16.4% in the year to date.

Asian markets were generally subdued but positive, although Japan’s Nikkei 225 index opened strongly following Wall Street’s tech-led rally. In addition, some weakness in the yen added to the attraction of the country’s exporters as well as those companies with exposure to overseas earnings, which prompted some strength in the likes of Nintendo and Toyota. 

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The recovery Stateside received a warmer reception in London, with the FTSE100 opening comfortably higher.

Despite the usual Thursday headwind of stocks being marked ex-dividend and therefore with lower prices (today relating to Endeavour Mining (LSE:EDV), Intertek Group (LSE:ITRK) and most notably M&G Ordinary Shares (LSE:MNG)), strength in the likes of Scottish Mortgage Ord (LSE:SMT), itself a beneficiary of exposure to tech, pushed prices higher.

Overnight strength in an oil price which is now down by 7% this year lifted the oil majors BP (LSE:BP.) and Shell (LSE:SHEL), while a broker upgrade to the beleaguered Diageo (LSE:DGE) added 3% to its price. The stock nonetheless remains down by 24% over the last year and by 16% in the last six months alone, given what has been a testing year for sales of its premium brands, particularly in Latin America and the Caribbean.

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After recently avoiding relegation from the premier index, easyJet (LSE:EZJ) also rose on a positive upgrade to its target price, with a broad mark up to the index lifting the vast majority of stocks.

The spike means that the FTSE100 is now up by 7.3% in the year to date, and less than 2% away from its May record high. The more domestically focused FTSE250, meanwhile, is up by 5.3% so far this year, with some tepid UK economic data of late being largely outweighed by increasing M&A activity.