Stocks opened higher across the board Wednesday as investors cheered the latest inflation data. The main indexes struggled as the session wore on, though, as anxiety grows ahead of tomorrow morning's release of the September Consumer Price Index (CPI) report and the start of third-quarter earnings season.
This morning's data from the Bureau of Labor Statistics showed the September producer price index (PPI), which measures what businesses are charging suppliers for goods, rose 0.5% month-over-month, slower than August's 0.7% increase but above economists' estimates, as gas prices remained high. On a year-over-year basis, the PPI was up 2.2% – its biggest annual increase since April.
Core PPI, which excludes volatile food and energy prices, was unchanged at 0.2% in September, matching economists' forecasts. Year-over-year, core PPI was up 2.8%, slightly lower than the 2.9% rise seen in both July and August.
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Inflation remains top of mind for the Federal Reserve. The fact that it remains stubbornly high is the reason "a majority" of central bank officials are leaving the door open for another potential rate hike this year, according to the minutes from the September Fed meeting that were released this afternoon.
However, the minutes also said that "all participants agreed" that the Fed is in a position to "proceed carefully" and base policy decisions on "the totality of incoming information and its implications for the economic outlook as well as the balance of risks."
CPI report, earnings season on deck
The Fed will get its next inflation update tomorrow with the early morning release of the September CPI report. José Torres, senior economist at Interactive Brokers, expects "a 0.4% increase, led by rising food and gasoline costs. Persistent services inflation and rising prices for used and new automobiles will likely contribute to upside risks as well."
Also on Wall Street's radar is the start of third-quarter earnings season, which kicks off this Friday when several big banks are set to report. Wells Fargo (WFC, -0.3%) was one of several financial stocks that struggled today ahead of their upcoming turns on the earnings calendar.
Exxon to buy Pioneer Natural Resources for $60 billion
In single-stock news, Exxon Mobil (XOM) plunged 3.6% after the oil major said it will buy Pioneer Natural Resources (PXD, +1.4%) in an all-stock deal valued at nearly $60 billion. This marks the biggest M&A transaction of the year, and the largest for Exxon since its 1998 merger with Mobil.
"Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge," Darren Woods, chairman and CEO of Exxon Mobil, said in a press release. "The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis."
In other news, Birkenstock (BIRK) started trading on the New York Stock Exchange (NYSE) this afternoon. The German shoe company last night priced its initial public offering (IPO) at $46 per share – near the midpoint of its anticipated range. Today, BIRK opened well below here, at $41, before closing the session at $40.20.
David Trainer, CEO of New Constructs, a research firm powered by artificial intelligence, recently issued a warning on the Birkenstock IPO. "We don't doubt that Birkenstock has strong brand equity and produces stylish sandals, but there is really no reason for this company to be public," Trainer wrote in a note to clients. "We do not think investors should expect to make any money by buying this IPO."
As for the major indexes, all three were in negative territory this afternoon before climbing higher by the close. The Nasdaq Composite ended the day up 0.7% at 13,659, while the S&P 500 (+0.4% at 4,376) and the Dow Jones Industrial Average (+0.2% at 33,804) ended with more modest gains.
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