Traders work on the floor at the New York Stock Exchange.
Brendan McDermid | Reuters
The S&P 500 and Nasdaq Composite popped to record highs Wednesday, adding to their strong 2024 performances, boosted by a lighter-than-expected U.S. consumer inflation report.
The broad market index gained 1%, while the tech-heavy Nasdaq rose 1.1%. The Dow Jones Industrial Average climbed 288 points, or 0.7%, and was less than a half percentage point away from hitting an all-time high.
The consumer price index rose 0.3% for the month of April, less than the Dow Jones estimate for a 0.4% monthly increase. The gauge increased 3.4% year over year, in line with expectations. Monthly and yearly numbers for core CPI, which excludes volatile food and energy prices, were both in line as well.
Retail sales remained flat in April. Economists anticipated a 0.4% jump.
Both reports boosted expectations for Federal Reserve rate cuts in the near future. Fed funds futures trading data now suggests a 51.7% likelihood that the U.S. central bank will ease rates at its September meeting, according to the CME FedWatch Tool. This is up from Tuesday’s 44.9% chance of a rate cut in the same month.
“Markets really wanted these reports to be soft, and they got what they wanted,” said Brian Nick, senior investment strategist at the Macro Institute, who added that these readings solidified the case for the Fed to begin cutting rates this year. “Companies like Nvidia and a lot of these higher growth names are going to benefit from falling interest rates.”
Market leaders such as Nvidia popped upon the inflation reading, with shares of the GPU manufacturer rising nearly 3%. Tech titans Apple, Microsoft and Netflix all added more than 1%.
Yields on the benchmark U.S. 10-year Treasury and 2-year Treasury dipped following the morning’s reports. The yield on the 10-year Treasury fell 10 basis points to 4.346%. The 2-year Treasury yield was last at 4.734% after sliding by nearly 9 basis points.
Stocks have been on a tear this year, as expectations for lower Fed rates and enthusiasm around artificial intelligence — and its potential to boost profits — lifted investor sentiment. The S&P 500 is up more than 10% year to date. That said, the broad market index stumbled in the past month as worries over sticky inflation pressured equities.
SPX year to date
Those concerns were quickly assuaged by new data and comments from Fed officials indicating rate hikes are unlikely going forward.