U.S. stocks surged on Wednesday after the latest inflation data showed consumer price inflation in May came in below expectations, hours before the Federal Reserve is due to meet this afternoon to provide its latest signal on interest rate movements.
The S&P 500 (^GSPC) rose more than 1.2% to hit its 27th record this year. The tech-heavy Nasdaq Composite Index (^IXIC) rose nearly 1.8%, hitting a record high from the previous day. The Dow Jones Industrial Average (^DJI) also rose about 0.5%.
The Consumer Price Index (CPI) was flat from the previous month and rose 3.3% from a year earlier in May, slowing from April’s 0.3% increase from the previous month and 3.4% increase from a year earlier. Both measures beat economists’ expectations. On a “core” basis, which excludes volatile costs such as food and gasoline, prices rose 0.2% from the previous month and 3.4% from a year earlier in May, lower than the April data. Both measures beat economists’ expectations.
This has shifted market expectations for Fed rate cuts this year: After the data was released, the market was pricing in about a 69% probability that the Fed will begin cutting rates by the September meeting, up from about 53% the day before, according to data from the CME FedWatch tool.
The 10-year Treasury yield (^TNX) fell about 14 basis points to 4.26%, its lowest level since April 1. Interest-rate sensitive stocks in the market surged afterwards. The small-cap Russell 2000 (^RUT) index rose more than 3.1%.
read more: How does the labor market affect inflation?
But that could all change later this afternoon. With a Fed decision all but certain, and the central bank expected to keep interest rates at their current 23-year high, investors will be watching more closely for the release of the latest economic projections on the Fed’s “dot plot,” specifically how many times it expects to cut interest rates for the rest of the year.
The last we heard was in March, when the number was 3. Policymakers will almost certainly cut that number significantly, given the aforementioned robust inflation early this year. These projections, along with Fed Chairman Jerome Powell’s comments at his press conference, may be the final market-moving events of a very busy day.
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Apple reclaims its position as the world’s largest stock
Apple (AAPL) shares were up nearly 4% on Wednesday morning, extending their gains from a one-year high hit on Tuesday.
The move gave the iPhone maker a market cap that surpassed that of Microsoft (MSFT) to become the world’s largest stock. Apple’s market cap surpassed $3.3 trillion on Wednesday, surpassing Microsoft’s market cap of $3.25 trillion.
Apple shares rose as investors digested the announcement of its AI platform, Apple Intelligence, which some Wall Street analysts hailed as a possible catalyst for sparking the next iPhone upgrade cycle.
Below are the market capitalizations (in trillions) of major stocks in the U.S. market.
Source: Yahoo Finance -
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Nvidia is the sun…
Kudos to Apollo chief economist Torsten Slok for checking out the S&P 500 mood.
Obviously, Nvidia (NVDA) is the sun that supports the other 499 companies.
Note: Apollo is the parent company of Yahoo Finance.
That’s the Nvidia market. (Apollo) -
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