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Wall Street on Wednesday surged to a new record intraday high, after a slew of economic data including the latest consumer inflation report strengthened bets for interest rate cuts by the Federal Reserve.
Core consumer prices in April cooled for the first time in six months. Additionally, retail sales came in flat for the same month, while a reading on regional business activity for May showed a continued decline. The combination of slowing inflation and stalling growth is exactly what the Fed wants to see in order to gain confidence to ease monetary policy.
Approaching mid-day, the tech-heavy Nasdaq Composite (COMP:IND) and the benchmark S&P 500 (SP500) had both scaled fresh all-time intraday peaks, with the former advancing 0.98% to 16,672.52 points and the latter gaining 0.84% to 5,290.99 points. The blue-chip Dow (DJI) was also on record watch, climbing 0.58% to 39,788.92 points and within sight of its intraday high of 39,889.05.
Of the 11 S&P sectors, nine were in the green. Consumer Discretionary and Energy were the two losers.
Before the opening bell, the U.S. Census Bureau said retail sales came in at $705.2B in April, virtually unchanged from March. The flat performance followed two hot monthly gains, pointing to caution in consumer spending.
At the same time, the U.S. Bureau of Labor Statistics reported a 0.3% M/M increase in headline consumer price index (CPI) for April, a shade lower than the consensus of +0.4%. Meanwhile, core CPI, which excludes food and energy, also rose 0.3%, matching the estimate. The headline number cooled for the first time since December 2023, while the core figure slipped for the first time October last year.
“Today’s number, as well as yesterday’s (producer price index), imply a 0.23% increase in the April core PCE index, by our estimation, which would take the year-ago gain down from 2.8% to 2.7%,” JPMorgan’s Michael Feroli said.
“The April inflation outturns are still firmer than the Fed’s inflation goals, but at least are moving in the right direction again after the backsliding seen over the prior few months. We’re sticking with our call for a first Fed rate cut in July, but we probably need to see some further cooling in labor market activity for that to play out,” Feroli added.
Along with the retail sales and CPI data, Empire State’s monthly manufacturing survey showed business activity continuing to decline in the New York State area.
“Inflation in line and going lower…strong economy losing a little strength. Good conditions for a bull market,” Ross Gerber, co-founder of Gerber Kawasaki Wealth & Investment Management, said on X (formerly Twitter).
U.S. Treasury yields slumped as traders snapped up bonds following the trifecta of favorable economic data. The longer-end 30-year yield (US30Y) was down 6 basis point to 4.53%, while the 10-year yield (US10Y) was down 8 basis points to 4.37%. The shorter-end more rate-sensitive 2-year yield (US2Y) was down 6 basis points to 4.76%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Turning to active stocks, a two-day meme stock rally stalled on Wednesday. GameStop (GME) shed nearly 31% after a whopping 179.2% jump over Monday and Tuesday.
Attention will be on networking giant Cisco’s (CSCO) quarterly results after the opening bell.
Also grabbing the spotlight will be 13F filings – regulatory disclosures by major funds of their quarterly equity ownership changes. There is speculation that Berkshire Hathaway (BRK.A)(BRK.B) may finally reveal the identity of the undisclosed stock in which it has been racking up a position since H2 of last year.
