By Noel Randewich and Ankika Biswas
(Reuters) - The S&P 500 and Nasdaq ended higher on Wednesday after data showing a moderate increase in consumer prices in August cemented expectations that the Federal Reserve will leave interest rates unchanged in September.
Megacap growth stocks Tesla (NASDAQ:TSLA), Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT) and Amazon.com (NASDAQ:AMZN) gained over 1% each.
Apple (NASDAQ:AAPL) dipped 1.2%, down for a second day after unveiling new iPhones on Tuesday while leaving prices unchanged.
The S&P 500 climbed 0.12% to end the session at 4,467.44 points.
The Nasdaq gained 0.29% to 13,813.59 points, while the Dow Jones Industrial Average declined 0.20% to 34,575.53 points.
The S&P 500 consumer discretionary index climbed 0.9%, lifted as Ford Motor (NYSE:F) rallied 1.5% on the vehicle maker's plans to double the production of its hybrid F-150 pickup trucks in 2024.
Data showed consumer prices increased by the most in 14 months in August as gasoline prices surged, but the annual rise in underlying inflation was the smallest in nearly two years.
Stickiness in services inflation has kept alive prospects of a November hike. Interest rate traders now see a 97% chance of the Fed holding rates in September, and a 61% likelihood of a pause in November, according to the CME FedWatch Tool.
"I don't think the Fed wants to throw a shock and do a 25-basis-point hike when the expectations are that they won't, but rate hikes are not completely off the table for the rest of the year," said Victoria Fernandez, chief market strategist at Crossmark Global Investment.
Gasoline prices, which have stoked inflation worries, peaked at $3.984 per gallon in the third week of the month, compared with $3.676 per gallon during the same period in July.
The S&P 500 utilities index gained 1.2%, with the traditionally defensive sector's rally hinting at investor nervousness ahead of producer price and retail sales data on Thursday, which could influence the Fed's Sept. 20 policy decision.
"That is somewhat of a red flag, it points to skittishness among equity holders, and that's not necessarily unexpected," said Keith Buchanan, a portfolio manager at GLOBALT Investments in Atlanta.
The Fed is unlikely to cut rates before the April-June period next year, a Reuters poll showed.
Volume on U.S. exchanges was in line with recent weeks, with 9.9 billion shares traded, compared to an average of 9.9 billion shares over the previous 20 sessions.
Citigroup (NYSE:C) rose 1.7% after CEO Jane Fraser announced a major management re-organization that will result in more job cuts and give her greater direct oversight over the bank as she seeks to simplify its structure.
U.S.-listed shares of Chinese electric-vehicle makers Nio (NYSE:NIO) and Xpeng (NYSE:XPEV) dropped 4.7% and 3.1%, respectively, after the European Commission started an investigation to assess whether their vehicles warrant punitive tariffs.
Sprit Airlines fell over 6% after the low-cost carrier cut its third-quarter revenue outlook to reflect rising fuel prices.
Moderna (NASDAQ:MRNA) gained 3.2% after the drugmaker said its flu vaccine mRNA-1010 met the primary goal in a late-stage trial. The firm also announced it was scaling down manufacturing of its COVID-19 vaccine.
Declining stocks outnumbered rising ones within the S&P 500 by a 1.5-to-one ratio.
The S&P 500 posted 10 new highs and 11 new lows; the Nasdaq recorded 20 new highs and 199 new lows.