The New York Stock Exchange is shown on Tuesday, June 11, 2024. Wall Street stumbled in premarket trading ahead of a busy week of inflation reports and the Federal Reserve's latest interest rate policy decision. (AP Photo/Peter Morgan)
NEW YORK (AP) – U.S. stocks are rallying following a surprisingly encouraging update on inflation. The S&P 500 was 0.9% higher in early trading Wednesday. The Dow Jones Industrial Average was up 362 points, and the Nasdaq composite was 1.1% higher. Treasury yields tumbled in the bond market after the report showed U.S. consumer prices rose 3.3% last month versus a year earlier, slightly less than expected. Markets rallied broadly after the inflation data raised expectations for coming cuts to interest rates. The Federal Reserve is making its latest announcement on rates later Wednesday, but it’s expected to stand pat for now.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
Stocks on Wall Street turned sharply higher early Wednesday after the government reported that inflation pressures eased in May, data that investors hope could move the Federal Reserve closer to cutting its benchmark interest rate from a 23-year peak.
Futures for major U.S. indexes, which were each up a modest 0.1% before the report was released, shot up after the report was made public. Futures for the Dow Jones Industrial Average and the S&P 500 each climbed 0.7% less than an hour before markets opened.
Treasury yields fell, with the 2-year yield coming down to 4.71% from 4.83% late Tuesday and the 10-year yield declining to 4.30% from 4.40% a day earlier.
Consumer prices excluding volatile food and energy costs – the closely watched “core” index – rose 0.2% from April to May, the government said Wednesday. That’s down from 0.3% the previous month and was the smallest increase since October. Measured from a year earlier, core prices rose 3.4%, below last month’s 3.6% increase and better than the 3.5% Wall Street was expecting.
Fed officials are scrutinizing each month’s inflation data to assess progress in their years-long fight against rising prices.
The Fed has held its main interest rate at its highest level in more than two decades and Wall Street is currently hoping for one or two cuts to that rate this year. Virtually no one expects the Fed to move its main interest rate at its current meeting, which started Tuesday. Policymakers will be publishing their latest forecasts on Wednesday for where they see interest rates and the economy heading.
Data on the economy have come in mixed recently, and traders are hoping for a slowdown that stops short of a recession and is just right in magnitude.
The economy has remained resilient with support from a strong jobs market and consumer spending. Consumers are becoming increasingly stressed, especially those with lower incomes, and retailers have been warning investors about the potential impact to earnings and revenue. The U.S. jobs market has been showing some signs of cooling, which could ease inflation but put more stress on consumers.
In equities, Paramount Global continued to fall before the bell after National Amusements – which owns a majority voting stake in the embattled entertainment giant – said Tuesday it ended talks on a possible merger of Paramount with movie production company Skydance Media. Paramount shares fell 2.8% before the bell following a nearly 8% drop a day earlier.
Even though it came up a tad short of Wall Street’s sales and profit targets, Oracle jumped 8% in off-hours trading after the chipmaker revealed a partnership with Google that would link the two company’s cloud services. Investors were also encouraged by Oracle’s bookings and strong full-year guidance.
In Europe, Germany’s DAX added 0.5% at midday and the CAC 40 in Paris climbed 0.4%. In London, the FTSE 100 was up 0.8%.
In Asian trading, Tokyo’s Nikkei 225 index lost 0.7% to 38,876.71.
Higher inflation and falling wages in Japan are raising questions about how the central bank can navigate away from near-zero interest rates. The Bank of Japan will issue a policy decision on Friday. In March, it raised its benchmark rate from minus 0.1% to a range of zero to 0.1%, the first such increase in 17 years.
The government reported Wednesday that producer prices rose 2.4% in May, as the yen’s weakness against the U.S. dollar raises costs for imports of fuel and manufacturing components. At the same time, the latest data show real wages adjusted for inflation fell in April for the 25th straight month.
The worry is that the Bank of Japan will be constrained from raising interest rates out of concern that higher prices will depress consumer spending, hurting the overall economy.
Elsewhere in Asia, Hong Kong’s Hang Seng index sank 1.3% to 17,947.88, while the Shanghai Composite index rebounded, gaining 0.3% to 3,037.47.
Australia’s S&P/ASX 200 shed 0.5% to 7,715.50. In Bangkok, the SET was flat.
Gains in technology shares pushed prices higher in South Korea, where the Kospi rose 0.8% to 2,728.17, and in Taiwan, whose Taiex jumped 1.2%.
In other trading early Wednesday, benchmark U.S. crude oil climbed $1.12 to $79.02 per barrel in electronic trading on the New York Mercantile Exchange.
Brent crude, the international standard, rose $1.08 at $83 per barrel.
The U.S. dollar fell to 156.20 Japanese yen from 157.14 yen. The euro climbed to $1.0830 from $1.0740.
The latest gains come a day after the S&P 500 and Nasdaq composite index hit records for the second straight day.
The S&P 500 rose 0.3% to 5,375.32, driven largely by gains in tech stocks. The tech-heavy Nasdaq composite rose 0.9% to 17,343.55.
The Dow Jones Industrial Average lagged the market, slipping 0.3% to 38,747.42.
