By Yasin Ebrahim

Investing.com – The S&P 500 closed higher Wednesday, led by strength in tech amid worries that persistently elevated inflation could dent the recovery just as the Fed’s September minutes signaled the taper of bond purchases could get underway as soon as next month. 

While the rose 0.3%, it was flat. It was up by 0.73%.

The Fed minutes stated that participants noted that, if there was a decision at the next meeting to start tapering purchases, then the tapering process could begin with monthly purchase calendars starting in mid-November or late-December.”

Minutes arrived shortly after Labor Department announced that consumer prices increased more than predicted in September.

It rose 0.4% in September, which was higher than the 0.3% increase recorded in August and is more than 0.3% estimates. CPI rose 5.4% in September due to an increase in consumer prices, up from 5.3% in August.

There are signs that price pressures may be emerging in some areas of the economy, such as rents or owners’ equivalent rents. This will put a test on the Federal Reserve’s continuing narrative that inflation is temporary.

“[P]Rice pressures are changing to the sticky components which will make it more difficult for the Fed to defend its ‘transitory” thesis,” Jefferies, NYSE: stated in a memo.

The 10-year inflation breakevens — a key measure of inflation expectations over the next decade – climbed to 2.53%, the highest since May 2018. Further inflation increases could lead to a reversal in the relation between stocks and bonds, which would push the market down. 

“Once [10-year breakevens] go above two and a half percent, stocks and bonds tend to move in the same direction,” Christoph Schon, Senior Principal, Applied Research at Qontigo, told investing.com in an interview on Wednesday. If we see further increases in breakeven inflation rates then there could be a simultaneous sale of both the bond and stock market.”

The biggest market drag was the financial sector, as a slowdown in the bank stocks occurred after JPMorgan’s third quarter earnings season.

JPMorgan Chase reported earnings for Q3 of $3.74 per shares on revenues of $29.65 trillion, as compared to estimates of $2.92 and $29.65 billion. Its stock fell over 2%.

BlackRock (NYSE 🙂 delivered an even better performance on the bottom and top lines. This sent its shares up more than 33%

Delta Air Lines (NYSE 🙂 made a profit for the third quarter but warned that fuel prices will affect fourth quarter results. Shares fell by almost 6%.

As oil prices recovered from session lows, energy saw some gains in terms of energy. It is expected that demand will increase.

Russian President Vladimir Putin claimed that $100 per barrel oil prices are possible.

The fall in Treasury yields was supportive for megacap tech. However, gains in overall sector were limited by Apple’s weakness.

Apple (NASDAQ) plunged 0.5% following Bloomberg’s report, which cited unnamed sources that Apple was likely to reduce iPhone 13 production due to the continuing global shortage of chips.

Alphabet Google (NASDAQ) and Facebook (NASDAQ), Google-parent Alphabets (NASDAQ), were both above the flatline.