US stocks rise, 2-year yield eases after soft inflation data

US stocks rose and the 2-year Treasury yield fell on Wednesday after softer-than-expected US inflation data reduced the odds of a Federal Reserve rate hike next month. Long-dated yields stayed higher, with the 10-year note on track for its biggest monthly gain since 2022.

Wall Street stocks rose and the two-year US Treasury yield eased on Wednesday after softer-than-expected US inflation data reduced the odds of a Federal Reserve rate hike next month. The market was lately pricing in roughly a 65 per cent chance that the Fed will keep rates steady next month, up from a 55 per cent chance before the inflation release, according to data from LSEG. Earlier this month, the Fed raised rates for the first time since 2023 to combat inflation.

The US Personal Consumption Expenditures Price Index rose 0.3 per cent on a monthly basis in August, an acceleration from the 0.1 per cent rate the previous month, and by 3.4 per cent year-on-year. Economists had expected a 0.4 per cent increase, according to consensus estimates. The 2-year note yield, which typically moves in step with interest rate expectations, fell 2.07 basis points to 4.868 per cent, from 4.889 per cent on Tuesday.

Long-dated yields were still higher, however, as global bonds closed out their worst month in years. The yield on benchmark US 10-year notes was last up 1.7 basis points at 5.272 per cent, from 5.255 per cent on Tuesday. The 30-year bond yield rose to 5.6298 per cent from 5.594 per cent. France's 10-year bond yield was set to post its biggest quarterly jump in nearly four decades and its biggest monthly rise in almost four years.

The Dow Jones Industrial Average rose 30.02 points to 51,379.94, the S&P 500 rose 45.83 points, or 0.6 per cent, to 7,716.67 and the Nasdaq Composite rose 273.34 points, or 1 per cent, to 27,071.20. The pan-European STOXX 600 index fell 0.4 per cent.

Oil prices rose on stalled US-Iran peace talks and tightening US fuel markets. US crude rose 2.2 per cent to US$91.33 a barrel and Brent November futures were up US$1.12, or 1 per cent, at US$103.71. Brent was headed for its biggest monthly gain since July. The US dollar weakened after the inflation data, with the euro up 0.16 per cent at US$1.1358 and the dollar down 0.08 per cent against the Japanese yen at 157.15.