Following a slowdown in May inflation, which sent rates down ahead of the Federal Reserve's June interest-rate decision, stocks surged on Wednesday.
The Dow Jones Industrial Average increased by 140 points, or 0.4%, during trading. The S&P 500 increased 1.1% to set a new high. With a 1.8% rise, the Nasdaq Composite also reached a new record high. In the previous session, the Nasdaq and the S&P 500 had both set closing records.
In May, the consumer price index remained stable, deviating from the 0.1% monthly increase predicted by the Dow Jones. The inflation measure rose 3.3% year over year, which was again below forecast and decelerated from the previous 3.4% pace. The core CPI monthly and annual statistics, which do not include the fluctuating prices of food and energy, were also less than expected.
As worries about inflation subsided ahead of the Fed's two-day policy meeting ending on Wednesday, the yield on the 10-year Treasury fell down below 4.3%. On Wednesday afternoon, the Fed will provide updated estimates for inflation and rate decreases. Fed Chair Jerome Powell will then hold a press conference.
The founder and CIO of Infracap, Jay Hatfield, stated, "I think that absent this data, they're going to have quite a hawkish tone, with most of that probably written in stone in terms of the statement and dot plot." "They don't have enough time to adjust the dot plot, but Powell will probably be a touch softer in tone somewhat as a result of this print.”
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Following the release of the data, traders were increasing their odds of an interest rate decrease in September, according to Fed fund futures, from even odds the day before to almost 70%. By the end of the year, futures indicated that the market was pricing in a 74% possibility of a second cut. In July as well as at the meeting on Wednesday, traders continued to forecast no change.
The recent pressure on stocks due to fears that higher interest rates were choking the economy was eased after the release of the weak CPI report and the associated decline in yields.
Shares of Bank of America and other financial institutions rose. Lowe's and Home Depot leaped.
As investors' appetite for risk was piqued by the lower inflation statistics, Nvidia, Broadcom, and other technology shares saw gains as well.
Shares of Oracle surged 15% as investors ignored the company's recent quarter's disappointments in favor of the software maker's recently announced cloud agreements with Google and OpenAI.
