By STAN CHOE AP Business Writer
NEW YORK (AP) — Some of the pressure that’s ballooned in the bond market is easing on Wednesday after a report said inflation across the United States wasn’t as bad last month as economists expected.
The better-than-expected data helped shorter-term Treasury yields slow their pressure-cranking jumps, a day after the 10-year Treasury yield touched its highest level since 2002. That in turn helped support U.S. stock indexes.
The S&P 500 rose 0.5% and is close to finishing September with a small gain instead of a loss. The Dow Jones Industrial Average was down 45 points, or 0.1%, as of 12:29 p.m. Eastern time, and the Nasdaq composite was 1% higher.
Easier Treasury yields help the broad stock market because higher yields slow the overall economy by making borrowing money more expensive for everyone, while undercutting prices for all kinds of investments.
Shorter-term yields eased as traders pared bets that the Federal Reserve will raise its main interest rate next month to get inflation further under control. They now see just a 39% chance of that, down from the coin flip’s chance seen a day earlier, according to data from CME Group. That helped the yield on the two-year Treasury fall to 4.88% from 4.89% late Tuesday.
The morning’s report said that U.S. consumers had to pay prices that were 3.4% higher overall in August for the cost of living than a year earlier. That was not as bad as the 3.7% that economists expected, even if it remained worse than the Fed’s 2% target.
The report followed others from earlier in the month about inflation during August, but this is the one that the Federal Reserve prefers to use.
To be sure, worries about high inflation are just one of the reasons yields have jumped in the United States and around the world. The seemingly solid U.S. economy, which continues to chug along despite its many challenges, is also supporting yields, and a report on Wednesday said its growth was even stronger during the spring than earlier estimated.
A separate report, meanwhile, said growth in business activity in the Midwest was better than economists expected.
Other factors sending yields higher are also continuing to churn, including worries about the big debt loads that Washington and other governments worldwide are supporting.
That sent longer-term Treasury yields higher. The 10-year Treasury, which is the centerpiece of the bond market, saw its yield briefly drop as low as 5.20% before rising to 5.29%. That’s up from 5.26% late Tuesday.
The 30-year Treasury yield, which takes into account expectations for inflation and economic growth many years down the line, rose to 5.63% from 5.59% late Tuesday.
The bond market also felt upward pressure from another climb for oil prices, which have been swinging on uncertainty about when the war with Iran will allow the flow of crude to be fully restored. Brent crude, the international standard, rose 2.9% to $98.99 per barrel.
On Wall Street, Hewlett Packard Enterprise helped drive the market higher after rising 6.1%. It increased its forecast for revenue from its networking business, which is benefiting from the boom in artificial-intelligence technology.
Another AI winner, Nvidia, was one of the strongest forces lifting the S&P 500 after adding 1.4%. It has come under pressure, along with the broad industry, on worries that its stock price shot too high. High interest rates pack a particularly hard punch on stocks seen as the most expensive.
Nvidia also benefits from lower yields because they make it cheaper for customers to borrow money to build AI data centers.
MongoDB climbed 6.1% after saying its board boosted the database company’s program to send cash to shareholders through buybacks of its own stock by $1 billion. That helped MongoDB recover some of its sharp loss from earlier in the week, after it said Chirantan “CJ” Desai was stepping down as CEO for a senior role at Meta Platforms.
Such gains helped offset a 3.3% drop for Cal-Maine Foods after the country’s largest egg company reported a larger loss for the latest quarter than analysts expected. With plenty of eggs available in the market, Cal-Maine Foods saw a sharp drop in prices it could charge, compared with a year earlier.
In stock markets abroad, indexes dipped in Europe following a mixed finish in Asia. Japan’s Nikkei 225 jumped 1.9%, while France’s CAC 40 fell 0.9% for two of the world’s bigger moves.
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AP Business Writers Yuri Kageyama and Michelle Chapman contributed to this report.