Stocks struggled for direction amid bets that even if the Federal Reserve pauses its rate hikes in September, policy will remain tight to prevent a flare-up in inflation. Treasuries fell after a weak 30-year bond auction.

Wall Street’s risk-on bid faded as Fed Bank of San Francisco President Mary Daly told Yahoo! Finance the central bank still has “more work to do.” She added that officials have yet to decide whether to raise and for how long to hold rates. That’s even after data showed the core consumer price index had the smallest back-to-back increase in more than two years.

“The case is building for the Fed to keep policy rates unchanged in September,” said Seema Shah, chief global strategist at Principal Asset Management. “While inflation is moving in the right direction, the still-elevated level suggests that the Fed is some distance from cutting rates.”

The S&P 500 closed little changed after a gain that topped 1per cent earlier Thursday. Nvidia Corp., which has more than tripled this year, extended a three-day slide. General Motors Co. and Ford Motor Co. dropped on growing concern that demands from union leaders could send the automakers’ labor costs soaring. Walt Disney Co. rallied after saying capital spending and outlays for movies and TV shows are coming in lower than projected.

Treasury 30-year yields climbed after a US$23 billion auction was awarded the highest rate since 2011. Two-year yields, which are more sensitive to imminent Fed moves, were little changed. The dollar erased losses. Oil’s rally, driven by increasing signs of a tightening market, paused near the highest levels of the year as technical barriers stalled further advances.

More on CPI:

George Mateyo, chief investment officer at Key Private Bank:

• “Today’s inflation report was reminiscent of the good old days. The Fed, therefore, might feel as if they’ve ‘stuck the landing’ and can pause as planned and not raise interest rates in September. That said, in our view, the economy continues to be carrying decent momentum, and as was reported last week, wage growth is still robust. So, while a pause is probable, a near-term pivot is not.”

Greg Wilensky, head of U.S. fixed income at Janus Henderson Investors:

• “Overall, we expect to see the Fed keep policy rates unchanged in September, though there is still time and data to come ahead of the next meeting. If economic conditions continue as expected, we believe we have seen the last hike for this cycle. This makes us more constructive on adding interest-rate risk, particularly at the front of curve.”

Michael Contopoulos, head of fixed income at Richard Bernstein Advisors:

• “We still have another CPI print before the next Fed meeting, but I think today’s data in isolation would bolster the case for a skip. The other thing worth highlighting from today’s report is the jump in unemployment claims after a period of strength. I don’t think it’s a coincidence that inflation continues to moderate as the labor market continues to weaken (albeit at a snails pace).”

Callie Cox, U.S. investment analyst at eToro:

• “We are far from the inflationary conditions of last year. Now, the job clearly isn’t done yet. Stubbornly high inflation – even at 3 or 4per cent – can warp how we think about money. And the chance of a recession is still significant. The Fed has hiked rates aggressively, and we still don’t know what cracks are forming underneath the surface. In this environment, it’s important to stay defensive while respecting the bull market’s momentum.”

Greg McBride, chief financial analyst at Bankrate:

• “While this report supports the notion of the Federal Reserve holding interest rates steady at their September meeting, we’ll need to see more evidence of easing inflation pressures before the Fed is comfortable moving to the sidelines and staying there.”
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Key events this week:

• UK industrial production, GDP, Friday
• U.S. University of Michigan consumer sentiment, PPI, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 4 p.m. New York time
• The Nasdaq 100 rose 0.2per cent
• The Dow Jones Industrial Average rose 0.1per cent
• The MSCI World index rose 0.1per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.1per cent
• The euro was little changed at US$1.0980
• The British pound fell 0.3per cent to US$1.2676
• The Japanese yen fell 0.7per cent to 144.80 per dollar

Cryptocurrencies

• Bitcoin fell 0.3per cent to US$29,405.98
• Ether fell 0.2per cent to US$1,847.65

Bonds

• The yield on 10-year Treasuries advanced nine basis points to 4.10per cent
• Germany’s 10-year yield advanced three basis points to 2.53per cent
• Britain’s 10-year yield was little changed at 4.36per cent

Commodities

• West Texas Intermediate crude fell 1.8per cent to US$82.84 a barrel
• Gold futures fell 0.2per cent to US$1,946.10 an ounce