U.S. stocks traded modestly higher early Tuesday, finding support after data showed a smaller-than-expected rise in August inflation.

What’s happening

The Dow Jones Industrial Average

rose 94.36 points, or 0.3%, to 34,963.99.

The S&P 500

gained 11.06 points, or 0.3%, to trade at 4,479.79.

The Nasdaq Composite

was up 47.95 points, or 0.3%, at 15,153.53.

On Monday, the Dow jumped 262 points, or 0.8%, to end at 34869, ending a five-session losing run. The S&P 500 rose 10 points, or 0.2%, to 4468, while the Nasdaq Composite slipped 10 points, or 0.1%, to 15105.

What’s driving markets

The U.S. consumer price index rose 0.3% in August, while the core reading, which excludes volatile food and energy prices, was up just 0.1%.

The CPI increased 5.3% year over year, compared with expectations for a 5.4% increase, and a rise of 5.5% for the year in July. The year-over-year change in core CPI fell back to 4% from 4.3% in July. Expectations were for a year-over-year pace of 4.2%.

“Coupled with the soft August jobs report, indications that the pace of rising prices are ebbing may provide the Fed with a bit more leeway in determining when to begin to pare back its bond purchases,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors, in emailed comments.

Economists and investors “will continue to monitor comments from Fed officials for any hints about the timing and magnitude of that first step and what it may indicate for the path ahead for monetary policy,” he said.

Some analysts saw the market reaction as a knee-jerk move that could fade.

“The markets responded as if this slightly weaker inflation data was going to change the time of the taper. I, for one, don’t expect this to be a game changer,” said Fawad Razaqzada, analyst at ThinkMarkets, in a note.

The Fed is still likely to announce a plan to begin tapering its bond purchases before the end of the year, he said, noting that the reading reflected declines in items such as airfares, accommodation and used cars, which Fed officials had already expected to fall back. Meanwhile, worries over more persistent factors driving up price pressures remain.

Earlier, the National Federation of Independent Business said its small-business optimism index rose 0.4 point in August to 100.1. Small-business owners were somewhat more optimistic about the economy, but said record shortages of labor and supplies were cutting into sales and profits.

What companies are in focus?

Apple Inc.

will be in the spotlight as the megacap tech star launches its latest iPhones at an event due to start at 1 p.m. Eastern. Shares were up 0.6%.

Shares of database software giant Oracle Corp.

fell 3.8%, as its revenue for its fiscal first quarter came in below Wall Street estimates.

How are other assets trading?

The yield on the 10-year Treasury note

was up 0.3 basis point at 1.325%. Yields and debt prices move in opposite directions.

The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, fell 0.4%.

Oil futures rose, with the U.S. benchmark

up 0.9% at $71.08 a barrel. Gold futures

rose 0.3% to $1,799 an ounce.

In European equities, the Stoxx Europe 600

rose 0.2%, while London’s FTSE 100

slipped 0.1%.

Chinese stocks continued to come under pressure, with the Shanghai Composite

falling 1.4% and the Hang Seng

dropping 1.2%. Analysts continue to focus on the declining fortunes of property giant China Evergrande
and a key slate of economics data is due on Wednesday.

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