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Wall Street recovers thanks to bitcoin and gold after an unexpected slowdown in inflation

Wall Street recovers thanks to bitcoin and gold after an unexpected slowdown in inflation
Wall Street recovers thanks to bitcoin and gold after an unexpected slowdown in inflation

 


NEW YORK (AP) U.S. stocks jump amid global rally Wednesday following surprise encouraging update on inflation.

The S&P 500 was up 1.2% at midday and on track to hit its all-time high set the day before. The Dow Jones Industrial Average was up 134 points, or 0.3%, as of 11:20 a.m. Eastern Time, and the Nasdaq Composite Index was up 1.9%.

Action was even stronger in the bond market, where Treasury yields fell after the report showed U.S. consumers paid 3.3% higher prices for food, insurance and everything remains last month, compared to a year earlier. Economists had expected an inflation rate stuck at 3.4%.

For Wall Street, a slowdown in inflation does not only help American households I'm having trouble following with prices rising rapidly, this also opens the door to the Federal Reserve lower its main interest rate. Such a move would ease pressure on the economy and boost investment prices.

Everything from bitcoin to gold to copper rallied after inflation data raised expectations of upcoming interest rate cuts. Investor nervousness about U.S. stocks has also eased.

Virtually no one expects the Federal Reserve to begin cutting interest rates at its latest meeting, which is scheduled to end Wednesday afternoon. The Fed has insisted that it needs an accumulation of data showing that inflation is moving sustainably toward its 2% target.

That's good news, but we'll need more, according to Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management.

But it's good news after progress in reducing inflation appeared to stall earlier this year. Some recent better-than-expected labor market reports have also raised concerns about continued upward pressure on inflation. Of course, a slowdown in inflation too quickly could also raise fears that U.S. consumer spending will fall too sharply, which could lead to a recession.

Traders bet the Federal Reserve would cut interest rates as early as September, according to CME Group data.

This has allowed sectors of the stock market that tend to benefit the most from falling interest rates to fare best amid a broad-based recovery.

Small businesses that need to borrow to grow and feel the effects of rising interest rates more than their rivals led the market. The smallest stocks in the Russell 2000 index jumped 2.8%.

Real estate values ​​have also climbed. Lower interest rates mean bonds pay less interest, which can lead potential investors to look at dividend-paying property owners. Office owner Boston Properties jumped 5.5%.

Lower interest rates could also lead to a decline mortgage rates and inject energy into the real estate market. Homebuilder DR Horton climbed 4.8%.

Oracle helped push Wall Street up with a 10.7% jump, even though it reported a profit for the latest quarter that was weaker than analysts expected. Financial analysts pointed to strong bookings, including contracts related to artificial intelligence training.

The furore around AI has helped propel stocks to record highs despite concerns about high interest rates and the economic slowdown they bring. Nvidia was once again one of the most powerful forces pushing the S&P 500 higher, with a 3.9% gain. The microchip company has become the poster child of the AI ​​rush, and its total market value has surpassed $3 trillion.

The only company that pushed more on the S&P 500 than Nvidia was Apple, which jumped 5%. Its stock has jumped in the last two days after receiving an initial favorable reception to the announcement of several AI-related offerings coming to its operating systems.

In the bond market, the yield on 10-year Treasury bills fell to 4.26%, compared to 4.40% Monday evening and 4.60% a few weeks ago. The two-year Treasury yield, which more closely tracks expectations for the Fed, fell to 4.68% from 4.83% late Monday.

On foreign stock markets, European indices jumped following the publication of encouraging data on American inflation. In Asia, where markets closed before the data was released, indices were mixed. Japan's Nikkei 225 index lost 0.7% as investors await the Bank of Japan's latest interest rate announcement scheduled for Friday.

___

AP Business writers Matt Ott and Elaine Kurtenbach contributed.

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