U.S. stocks are climbing Wednesday following a surprisingly encouraging update on inflation. The Federal Reserve also gave reassurance that it still sees a cut to interest rates, something Wall Street deeply desires, as likely this year. The S&P 500 was 1% higher in afternoon trading and on track to add to its all-time high set a day earlier. The Nasdaq composite was also building on its own record and was up 1.7%,. The Dow Jones Industrial Average was lagging the market with a gain of 4 points, or less than 0.1%.
Quick Read
- Wall Street rallied on Wednesday, buoyed by an encouraging inflation update and the Federal Reserve’s reassurance of potential interest rate cuts this year.
- The S&P 500 rose 1% in afternoon trading, aiming to add to its all-time high from the previous day, while the Nasdaq composite increased by 1.7%.
- The Dow Jones Industrial Average showed a modest gain of 4 points, or less than 0.1%.
- Treasury yields fell after inflation data showed a smaller-than-expected rise in consumer prices, fueling hopes for interest rate cuts.
- The Federal Reserve maintained its key interest rate but indicated that most policymakers still expect at least one rate cut this year.
- Smaller companies and real estate stocks, which benefit from lower interest rates, led the market gains, with the Russell 2000 index up 2.4% and Boston Properties jumping 4.3%.
- Tech stocks, particularly those linked to AI, surged, with Oracle up 13.1%, Nvidia gaining 3.6%, and Apple rising 4.4%.
- The yield on the 10-year Treasury dropped to 4.27%, and the two-year Treasury yield fell to 4.71%.
- European markets jumped on the positive U.S. inflation news, while Asian markets were mixed, with Japan’s Nikkei 225 down 0.7%.
The Associated Press has the story:
Wall Street rallies on hopes for coming cuts to key interest rates
Newslooks- NEW YORK (AP) —
U.S. stocks are climbing Wednesday following a surprisingly encouraging update on inflation. The Federal Reserve also gave reassurance that it still sees a cut to interest rates, something Wall Street deeply desires, as likely this year.
The S&P 500 was 1% higher in afternoon trading and on track to add to its all-time high set a day earlier. The Nasdaq composite was also building on its own record and was up 1.7%. Eastern time. The Dow Jones Industrial Average was lagging the market with a gain of 4 points, or less than 0.1%.
The action was even stronger in the bond market, where Treasury yields tumbled after the report showed U.S. consumers paid prices that were 3.3% higher for food, insurance and everything else last month, versus a year earlier. Economists had been expecting to see the inflation rate stuck at 3.4%.
For Wall Street, a slowdown in inflation not only helps U.S. households struggling to keep up with fast-rising prices, it also opens the door for the Federal Reserve to cut its main interest rate. Such a move would ease pressure on the economy and give a boost to investment prices.
Everything from bitcoin to gold to copper rallied after the inflation data raised expectations for coming cuts to interest rates. A measure of nervousness among investors in U.S. stocks also eased.
For its part, the Federal Reserve kept its main interest rate steady after its latest meeting ended Wednesday afternoon. It said it still needs an accumulation of data showing inflation is sustainably heading toward its 2% target before it lowers the rate, which is at the highest level in more than two decades.
But the Fed also indicated most of its policymakers are still forecasting at least one cut to interest rates at some point this year. They also raised their forecast for the number of cuts in 2025.
The Fed trimmed its forecast for cuts to rates this year down from three after progress on bringing inflation lower seemed to stall early this year. But such a fall-off was widely expected, and traders are still largely betting on the first of potentially two cuts to rates this year coming in September, according to data from CME Group.
That had areas of the stock market that tend to benefit most from lower interest rates doing the best.
Smaller companies that need to borrow to grow and feel the pinch of higher interest rates more than their larger rivals were leading the market. The smaller stocks in the Russell 2000 index jumped 2.4%.
Real-estate stocks were also shooting higher. Lower interest rates mean bonds are paying less in interest, which can send potential investors to dividend-paying real-estate owners instead. Office owner Boston Properties jumped 4.3%.
Lower interest rates could also pull down mortgage rates and inject energy into the housing market. Homebuilder D.R. Horton climbed 3.1%.
Oracle helped lead Wall Street higher with a jump of 13.1% even though it reported weaker profit for the latest quarter than analysts expected. Financial analysts pointed to strong bookings, including contracts related to artificial-intelligence training.
A furor around AI has helped send stocks to records despite worries about high interest rates and the slowdown in the economy that they induce. Nvidia again was one of the strongest forces pushing the S&P 500 higher, with a gain of 3.6%. The chip company has become the poster child of the AI rush, and its total market value has topped $3 trillion.
The only company to push more on the S&P 500 than Nvidia was Apple, which jumped 4.4%. Its stock has been jumping the last two days after getting a cool initial reception to the announcement of several AI-related offerings coming to its operating systems.
In the bond market, the yield on the 10-year Treasury fell to 4.27% from 4.40% late Monday and from 4.60% a couple weeks ago. The two-year Treasury yield, which more closely tracks expectations for the Fed, slumped to 4.71% from 4.83% late Monday.
In stock markets abroad, European indexes jumped following the release of the encouraging U.S. inflation data. In Asia, where markets closed before the data came out, indexes were mixed. Japan’s Nikkei 225 index lost 0.7% as investors wait for the Bank of Japan’s latest announcement on interest rates due Friday.
