US stocks drifted in tight ranges Wednesday, as investors digested strong economic data ahead of the release of widely-watched inflation data that is likely to factor into the outlook for interest rates.
At 09:35 ET (14:35 GMT), the Dow Jones Industrial Average rose 90 points, or 0.2%, while the S&P 500 index dropped 6 points or 0.1% and the NASDAQ Composite slipped 75 points, or 0.4%.
Trading volumes are likely to be muted Wednesday, ahead of the Thanksgiving holiday on Thursday and the early close on Black Friday.
PCE inflation data awaited for more rate cues Wednesday's main focus will be on the PCE price index for October, as the reading is the Fed’s preferred inflation gauge, and is likely to factor into the central bank’s plans to cut interest rates further.
The core PCE price index is also expected to have risen steadily in October, remaining above the Fed’s 2% annual target.
Recent signs of sticky US inflation have sparked some doubts over just how much the Fed will cut interest rates further, and markets have begun questioning the prospect of a 25 basis point cut in December.
These doubts were furthered by the release of strong economic numbers earlier Wednesday, suggesting that the US economy was in a healthy enough sate to cope with interest rates at current levels.
Weekly claims for first-time unemployment benefits dipped to 213,000 from a revised lower 215,000 in the prior week, with claims steadily retreating from the near 1-1/2-year high seen in early October, while the US economy grew at a unrevised 2.8% annualized rate in the third quarter, well above what Federal Reserve officials regard as the non-inflationary growth rate of around 1.8%.
The Federal Reserve is likely to cut interest rates in December before switching to a slower pace of cuts in 2025, UBS said in note, stating that US economic growth was likely to remain strong.
The Swiss bank’s base case is for a 25 basis point cut in December, after which the Fed is expected to cut rates once per quarter in 2025.
“While we expect somewhat more moderate GDP growth in the quarters ahead, Fed rate cuts should help to keep the expansion going,” UBS analysts wrote in a note.
Disappointing corporate results On the corporate front, HP (NYSE:HPQ) slid almost 8% after the information technology company issued disappointing guidance for 2025, while Dell Technologies (NYSE:DELL) tumbled 12% after the PC manufacturer offered up a disappointing revenue outlook for the current quarter despite bullish commentary from the company on AI sales growth.
Workday (NASDAQ:WDAY) fell 10% as the cloud-based business applications company issued disappointing subscription revenue guidance, hit by weaker client spending on its human capital management software.
Crude balances ceasefire/US stockpile draw Crude prices steadied Wednesday, with traders assessing the potential impact of a ceasefire deal between Israel and Hezbollah as well as an unexpected, substantial draw in US oil inventories.
By 09:35 ET, the US crude futures (WTI) dropped 0.1% to $68.68 a barrel, while the Brent contract fell 0.1% to $72.22 a barrel.
Both benchmarks settled lower on Tuesday after Israel agreed to a ceasefire with Lebanon's Hezbollah.
The deal will take effect today, potentially ending a conflict across the Israeli-Lebanese border, quelling some concerns that persistent fighting in the Middle East will disrupt oil supplies from the crude-rich region.
Data from the American Petroleum Institute, released on Tuesday, indicated that US oil inventories shrank by nearly 6 million barrels in the week to Nov. 22, compared with the small build expected.
If confirmed by official data later Wednesday, this would increase hopes that US fuel demand remained strong, potentially tightening oil supplies in the coming months.
