Stocks waver as traders eye US inflation and interest rates

NEW YORK, United States — Global stocks wavered Tuesday following a downcast World Bank economic forecast as investors hold their breath ahead of key inflation data and earnings reports.

"Investors are in a wait-and-see mode," said Art Hogan, analyst at B. Riley Financial, alluding to Thursday's United States inflation report and subsequent earnings releases from JPMorgan Chase and other banks on Friday.

Wall Street stocks opened tentatively, tripping into the red early on, but eventually shook off the weakness.

The tech-rich Nasdaq led the market, ending one percent higher on solid gains by Amazon, Facebook parent Meta Platforms and others.

The World Bank's latest economic forecast pointed to a "sharp, long-lasting slowdown" with global growth pegged at 1.7 percent, roughly half the pace it predicted in June, said the bank's latest Global Economic Prospects report.

But the biggest US economic release this week as far as investors will be concerned is Thursday's consumer price index report, expected to show further moderation after big jumps in prices for much of 2022.

The CPI data will be scrutinized for implications on Federal Reserve policy, with the central bank enacting aggressive interest rate hikes to combat inflation.

Fed Chair Jerome Powell avoided tipping his hand on future policy decisions Tuesday in a speech in Sweden, but said the insulation of the Fed from electoral politics allows it to hike interest rates if needed "without considering short-term political factors."

Another US central banker, Fed governor Michelle Bowman, expressed hopes for a soft landing during a separate public appearance.

"Unemployment has remained low as we have tightened monetary policy and made progress in lowering inflation," Bowman said in a prepared speech to an event in Florida.

"I take this as a hopeful sign that we can succeed in lowering inflation without a significant economic downturn," she added.

But she warned that the Fed's policy-setting Federal Open Market Committee will continue raising interest rates as there remains much work to do to lower inflation.

The benchmark lending rate will likely have to remain at a "sufficiently restrictive" level for some time to restore price stability, she said.

After a brutal 2022, equities worldwide have seen a strong start to the new year.

This was thanks in part to Beijing's decision to pivot from restrictive Covid-19 policies, and to an improving economic outlook for Europe due partly to mild weather that has not taxed the energy market.

On Tuesday, European stock markets closed broadly lower.