Wall Street soared higher on Wednesday, buoyed by new inflation data that showed a slowdown in the steady rise in US consumer prices for the month of June.
According to the Labor Department, the consumer price index (CPI) rose just 0.2% last month, boosted by higher gasoline prices as well as rents that offset a decrease in the price of used motor vehicles.
CPI rose 3.0% in the 12 months to June, down from 4.0% in May and the smallest year-on-year increase since March 2021. reuters informed of.
The Dow Jones Industrial Average rose 0.78% to 34,527.78, the S&P 500 rose 0.85% to 4,477.19 and the Nasdaq Composite rose 1.14% to 13,917.50.
Gains in US stocks helped lift MSCI’s main 47-country world index, which is now 13.66% higher for the year, bouncing back from late 2022 rate hike-induced lows.
Art Hogan, chief market strategist at B. Riley Wealth in New York, echoed the positive analyst sentiment, saying, “The CPI report came in softer than expected … and markets are responding positively.”
“The policy implications of this are clear given that the Fed is at or near the end of this rate hike cycle,” Hogan said.
dollar, yields retreat
Currency markets were also moving on CPI news. The dollar fell 0.75% to $100.97 on Wednesday, nearing its lowest level in over a year.
The yen was back near 140, up nearly 1%, and sterling was up 0.5% on the day to a 15-month high, as the Bank of England said the UK could face higher interest rates. Was doing.
US Treasury yields also declined, with the 10-year Treasury yield now down 8 basis points to 3.899%. The two-year, which typically moves in step with interest rate expectations, was down 14.3 basis points at 4.753%.
Wednesday’s moves saw euro zone bond yields slide, with Germany’s 10-year yield falling to 2.58%, having hit a four-month high of 2.679% on Monday.
“The bond market finally got the inflationary relief it was hoping for,” Bryce Doty, senior portfolio manager at Sitt Investment Associates in Minneapolis, said in an email.
The CME FedWatch tool showed markets are pricing in a 92% chance of a 25-basis-point Fed hike later this month, but further hikes after that are in doubt.
Investors’ focus will also be on the Bank of Canada, with analysts expecting a second straight quarterly rate hike at its upcoming meeting.
artificial fear
British banking stocks also jumped as Bank of England stress tests concluded that the top 8 UK banks have enough capital to weather an economic crisis worse than in 2008.
“The biggest fear among central banks is that the longer it takes to moderate inflation, the greater the risk of it strengthening,” David Bassaniz, chief economist at BetaShares, said in a note.
In Asia overnight, Australia’s S&P/ASX 200 index rose 0.4%, while a rally in the yen pushed Japan’s Nikkei down 0.8%.
Hong Kong’s Hang Seng index rose 1%, while bluechip Chinese shares fell 0.7%, as tech stocks fell 2.5% amid renewed concerns about Beijing’s attitude towards the sector.
In the US, second-quarter earnings start this week, with heavyweight banks JPMorgan, Citigroup and Wells Fargo operating as normal.
Overall Wall Street banks are expected to report higher profits as rising interest payments offset a slowdown in dealmaking.
Oil benchmark Brent futures breached the $80 a barrel mark for the first time since May on Wednesday following upbeat US inflation data. US crude was up 1% on the day at $75.58 a barrel and Brent was up 0.77% at $80.01.
