US STOCKS-Nasdaq boosted by Tesla, rate hike worries linger

BY Reuters | ECONOMIC | 09/30/22 12:47 PM EDT

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Tesla gains on plans to raise production

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Major indexes set for third straight quarterly decline

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Nike (NKE) slumps on margin warning, drags athletic gear makers

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Dow down 0.36%, S&P flat, Nasdaq up 0.32%

(Updates prices through out, updates comments)

By Ankika Biswas and Shreyashi Sanyal

Sept 30 (Reuters) - The Nasdaq index rose on Friday as Tesla gained on its plans to sharply increase production, even though resilient core inflation added to worries of big interest-rate hikes denting a rise in consumer spending.

Shares of the electric-vehicle maker gained 1.04% after Reuters reported its plans to push global production of its top-selling vehicles in the fourth quarter.

Other growth stocks also got a boost from a dip in the benchmark 10-year Treasury yield to a week's low of 3.682%, with Meta Platforms (META), Alphabet Inc and Amazon.com Inc, gaining between 0.1% and 1.7%.

Data showed the core personal consumption expenditures price index jumped 0.6% after being unchanged in July. It climbed 4.9% on a year-on-year basis in August after increasing 4.7% in July.

"Inflation is running hotter than expected, so the Fed is going to have to continue to act and probably be more aggressive than they would like to," said Brian Klimke, director of investment research at Cetera Financial Group.

Fed funds futures showed traders see a nearly 66% chance of the U.S. central bank raising rates by 75 basis points at its November meeting, up from 61% odds before the inflation data.

The Federal Reserve's aggressive stance on interest-rate hikes have pushed all the three major indexes into bear market and set them for their third straight quarterly decline. The Dow Jones Industrial Average was set for its worst month since pandemic lows. The S&P 500 has slumped 8.2% so far in September, testing its lowest level since November 2020, while the Nasdaq has lost over 9% during the month.

"Month-end portfolio rebalances and expiration of quarterly option strategies should act in support of the market today," said J.P. Morgan's Chief Global Markets Strategist Marko Kolanovic in a note.

Nike Inc (NKE) slid 11.74% as it warned of tightening margins, fueling concerns of an industry-wide drop in profit due to an inflation-induced hit to consumer sentiment.

Shares of Under Armour (UAA) slipped 6.04%, while footwear retailer Foot Locker Inc (FL) dropped 1.96%.

Lower-than-expected quarterly revenue from Carnival Corp (CCL) sent its shares plunging 20.91%, highlighting that soaring prices forced consumers to cut discretionary spending such as cruise travel.

Fed Vice Chair Lael Brainard, San Francisco Federal Reserve Bank President Mary Daly, and Richmond President Thomas Barkin backed the tough measures to bring down high inflation, with Brainard warning against premature rate cuts.

However, Richmond Fed president Thomas Barkin said there are "promising signs" inflation pressures have begun to ease though it may take time be seen in the data.

At 12:34 p.m. ET, the Dow Jones Industrial Average was down 105.94 points, or 0.36%, at 29,119.67, the S&P 500 was down 0.15 points, or 0.00%, at 3,640.32, and the Nasdaq Composite was up 34.87 points, or 0.32%, at 10,772.38.

For the third quarter, S&P 500 companies are expected to to show an earnings growth of 4.5%, according to Refinitiv data, down from prior expectations of 11.1% growth in July.

Advancing issues outnumbered decliners by a 1.87-to-1 ratio on the NYSE and by a 2.27-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week high and 52 new lows, while the Nasdaq recorded 15 new highs and 205 new lows. (Reporting by Ankika Biswas and Shreyashi Sanyal in Bengaluru; Additional reporting by Bansari Mayur Kamdar; Editing by Arun Koyyur)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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