Wall Street wobbles following run-up into inflation report

NEW YORK (AP) — Wall Street is wobbling Thursday as markets digest a report showing inflation slowed again last month, bolstering hopes the Federal Reserve may take it easier on the economy through smaller hikes to interest rates.

The S&P 500 was 0.2% higher in early trading after flipping between gains and losses. It's still holding onto a solid gain for the week after rallying in anticipation of Thursday's report, one that investors hoped would show a continued cooldown in inflation from its summertime peak. The report did show that and was exactly in line with economists’ expectations on many points, but analysts said it was still mixed and warned investors not to get carried away.

The Dow Jones Industrial Average was up 88 points, or 0.3%, at 34,061, as of 10:11 a.m. Eastern time, and the Nasdaq composite was 0.2% higher. They also were drifting between small gains and losses.

The nation’s painfully high inflation has been at the center of Wall Street’s wild movements for more than a year. Recently, stocks have been rising and bond yields have been falling on hopes inflation’s cooldown may get the Federal Reserve to ease off its barrage of rate hikes. Such increases can stifle inflation, but they do so by slowing the economy and risk causing a recession. They also hurt investment prices.

In the bond market, Thursday’s inflation report sent shorter-term yields falling further as traders increased bets for the Fed to downsize the size of its next rate increase. They’re now largely betting on a hike of just a quarter percentage point next month, down from last month’s half-point hike and from four prior increases of 0.75 percentage points.

Analysts cautioned that while Thursday’s inflation report hit did show inflation at its least debilitating level in more...