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The broader U.S. economy has been slowing, but consumers have remained resilient and the job market remains strong.
Stocks edged higher in morning trading on Wall Street Wednesday following the market's worst day in two years on fears about higher interest rates and the recession they could create.
The S&P 500 rose 0.4% as of 10:13 a.m. Eastern. The benchmark index is coming off its biggest drop since June 2020, which ended a four-day winning streak.
The Dow Jones Industrial Average rose 68 points, or 0.2%, to 31,169 and the Nasdaq rose 0.5%.
Energy stocks had some of the biggest gains as U.S. crude oil prices rose 2.2%. ExxonMobil rose 2.6%.
Bond yields remained relatively stable after leaping on Tuesday. The yield on the two-year Treasury rose to 3.79% from 3.75% late Tuesday, when it soared on expectations for more aggressive interest rate hikes by the Federal Reserve.
The yield on the 10-year Treasury, which helps dictate where mortgages and rates for other loans are heading, rose to 3.43% from 3.41%.
A report on inflation at the wholesale level showed prices are still rising rapidly, with pressures building underneath the surface, even if overall inflation slowed. It echoed a report on inflation at the consumer level Tuesday, which raised expectations for interest-rate hikes and triggered a rout for markets.
Traders now see a 1-in-3 chance the Fed may hike its benchmark rate by a full percentage point next week, quadruple the usual move. The central bank has already raised its benchmark interest rate four times this year, with the last two increases by three-quarters of a percentage point.
The Fed is taking the aggressive action on interest rates to try to cool the hottest inflation in four decades. Tuesday's report on high prices jolted the market with signs that inflation is entering a more stubborn phase that could require an already resolute Fed to become more aggressive.
Wall Street is especially worried that the rate hikes could go too far in slowing the economy and send it into a recession. The Fed is trying to avoid that outcome, but the latest inflation reports reveal that is becoming a more difficult task.
Consumer prices were up 8.3% in August compared with a year earlier, but that was down from an 8.5% jump in July and a 40-year high of 9.1% in June.LEARN MORE
The broader U.S. economy has been slowing, but consumers have remained resilient and the job market remains strong. Wall Street will get another update on inflation's latest impact on spending when the government releases its retail sales report for August on Thursday.
The market is also monitoring U.S.-China tensions and war in Ukraine, while business and government officials are bracing for the possibility of a nationwide rail strike at the end of this week that could paralyze an already discombobulated supply chain.
The railroads have already started to curtail shipments of hazardous materials and have announced plans to stop hauling refrigerated products ahead of Friday's strike deadline. Businesses that rely on Norfolk Southern, Union Pacific, BNSF, CSX, Kansas City Southern and other railroads to deliver their raw materials and finished products are planning for the worst.
Biden administration officials are scrambling to develop a plan to keep goods moving if the railroads shut down. The White House is also pressuring the two sides to settle their differences, and a growing number of business groups are lobbying Congress to be prepared to intervene and block a strike if they can't reach an agreement.
Additional reporting by The Associated Press.
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