Mixed Up: Dow Gains 45 Points Hits New High as Nasdaq Drops

Stocks finished mixed today as inflation firmed--but what that means is anyone's guess.

The S&P 500 dipped 0.1% to 2495.62 today, while the Dow Jones Industrial Average rose 45.3 points, or 0.2%, to 22,203.48, a new all-time high. The Nasdaq Composite fell 0.5% to 6429.0.

First, the data. Headline CPI rose 0.4% month-over-month in August, beating forecasts for a 0.3% increase, while Core CPI, which excludes food and energy, rose 0.2%, meeting expectations. Core CPI rose 1.7% from a year ago, while the headline number increased by 1.9%. That's not fast, but its an improvement over recent months. "The upward movement in the monthly print of core CPI in August followed 5 consecutive months where the average monthly increase was just 6 bp and no monthly increase was above 12 bp," write UBS economist Robert Martin and team. "These data should support the Fed's forecast that trend inflation is firming."

And the data also mean that a December rate hike is more likely, as the odds rose to 48.5%, according to CME FedWatch, up from 41.3% yesterday. But you wouldn't necessarily know it from looking at the market's best performing sectors. While materials, energy and industrial finished in the fourth-, third- and second-best performing sectors--about what you'd expect to see from a pickup in inflation--utilities were the best performing after rising 0.9% today. Treasury yields too barely budged--another oddity. Maybe the market is betting that the economy remains strong enough to help cyclical stocks, but not so strong that it pushes bond yields much higher.

Whatever it is, it's just plain weird.

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