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Stock market today: Wall Street hits records after slowing inflation

Stock market today: Wall Street hits records after slowing inflation

 


NEW YORK (AP) U.S. stocks hit record highs Wednesday on hopes that inflation is finally coming back in the right direction after a discouraging start to the year.

The S&P 500 was up 0.9% in afternoon trading and above its all-time high set in late March. The Nasdaq Composite Index added to its own record set the day before, up 1%, as of 12:45 p.m. Eastern Time, and the Dow Jones Industrial Average was up 270 points, or 0, 7%.

Relief came from the bond market, where Treasury yields eased to relieve some of the pressure on the stock market. The moves stem from traders' growing expectations that the Federal Reserve may actually cut its main interest rate this year.

Stocks that tend to benefit the most from falling interest rates have helped dominate the market. Real estate values ​​in the S&P 500 climbed 1.5%, while utility values ​​rose 1.4%. Their dividend payments look more attractive to investors when bonds pay less interest.

Homebuilders were hoping the Fed's cuts would lead to relief in mortgage rates, with Lennar and DR Horton both increasing at least 4%. Big tech companies and other high-growth stocks also rode the wave of rate cut expectations, and Nvidia's 3.4% gain was the main force pushing the S&P 500 higher .

That optimism comes from a report showing that U.S. consumers had to pay prices for gasoline, car insurance and everything else in April that were 3.4% higher overall than a year earlier. While this is painful, it is not as bad as the 3.5% inflation rate in March.

Perhaps more importantly, the slowdown came as a relief after reports on the consumer price index, or CPI, earlier this year came in consistently worse than expected. The disappointing series of data dashed expectations that the Federal Reserve would soon lower its main interest rate, which stands at its highest level in more than two decades.

A rate cut would drive up investment prices and remove some of the downward pressure on the economy.

According to Alexandra Wilson-Elizondo, co-chief investment officer of the multi-asset solutions business at Goldman Sachs Asset Management, today's CPI numbers prove that disinflation has simply been delayed over the past three months and did not derail.

A separate report showed stagnant spending growth among US retailers in April compared to March. This is a weaker result than the 0.4% growth expected by economists.

The slowdown in retail sales could be seen as a positive for markets, as it could reduce upward pressure on inflation. But a lockdown also raises concerns that cracks will form in U.S. consumer spending, which has been one of the main pillars that have kept the economy from entering a recession. The pressure increased particularly high among low-income households.

Hopefully the consumer doesn't run out of steam, but with savings spent during the pandemic, rising delinquencies, slower wage growth and now flat retail sales, a sharper slowdown in the economy cannot be excluded, said Brian Jacobsen, chief economist at Annex Wealth Management. .

That could threaten one of the key hopes that has driven the U.S. stock market to its record highs: that the Federal Reserve can successfully perform the balancing act of slowing the economy enough through high interest rates to stifle a high inflation, but not to the point of causing interest rates to rise. bad recession.

Another discouraging report released this morning indicates that the manufacturing sector in New York State is contracting more than expected.

On Wall Street, Petco Health + Wellness helped lead the market after surging 21.1%. He named Glenn Murphy, CEO of investment firm FIS Holdings, as executive chairman.

On the losing side were GameStop and AMC Entertainment, as momentum reversed after their a stunning start to the week. GameStop fell 32.2% to cut its gain for the week to 87.5%.

AMC Entertainment fell 23.8% after announcing it would issue nearly 23.3 million shares in exchange for $163.9 million in debt it owes.

On the bond market, the yield on 10-year Treasury bills fell to 4.35% from 4.45% Tuesday evening. The two-year yield, which moves more closely with expectations of Fed action, fell to 4.74% from 4.82%.

Traders now predict a 93.3% chance that the Fed will cut its main interest rate at least once this year, according to CME Group data. This is an increase from 89.7% the day before.

Indices in Asia were mixed. Stocks fell 0.8% in Shanghai after China's central bank left its benchmark interest rate unchanged. Stocks in Europe rose.

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AP writers Matt Ott and Zimo Zhong contributed.

Sources

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