U.S. Stocks Near September Gain as Inflation Data Offers Relief

U.S. Inflation Data Eases Pressure on Bond Markets

NEW YORK — Pressure in the U.S. bond market eased Wednesday after new inflation data showed that consumer prices rose less than economists had expected last month.

The cooler-than-anticipated inflation reading helped slow the sharp rise in shorter-term Treasury yields, providing some relief after the 10-year Treasury yield climbed to its highest level since 2002 a day earlier. The move also helped support U.S. stock markets.

The S&P 500 gained 0.5 per cent, putting the index on track to finish September with a modest gain rather than a decline. The Dow Jones Industrial Average slipped 45 points, or 0.1 per cent, while the Nasdaq Composite rose 1 per cent as of 12:29 p.m. Eastern time.

Lower Treasury yields can provide support for stocks because rising yields increase borrowing costs throughout the economy and can put downward pressure on the value of investments.

The latest inflation figures also caused traders to scale back expectations that the U.S. Federal Reserve will raise its benchmark interest rate next month in an effort to bring inflation further under control.

According to CME Group data, markets were pricing in a 39 per cent probability of a rate increase, down from roughly even odds a day earlier.

The shift in expectations helped push the yield on the two-year U.S. Treasury note down to 4.88 per cent, compared with 4.89 per cent late Tuesday.

For investors, the latest data offered some relief after a sharp rise in bond yields had raised concerns about the impact of higher borrowing costs on economic growth and financial markets.