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U.S. stocks rallied Wednesday after inflation data showed that consumer price gains cooled in March.
At 12:15 p.m. ET, the S&P 500 (^GSPC) added 0.22%, while the Dow Jones Industrial Average (^DJI) gained 0.3%. The technology-heavy Nasdaq Composite (^IXIC) ticked up above the flatline.
Bond yields were mixed. The yield on the 10-year note ticked down to 3.42%, while rate-sensitive two-year note yields slipped to 4.0% Wednesday morning.
March CPI showed price gains cooled last month in the slowest rise since May 2021. The consumer price index rose 0.1% in March, a slower pace than the 0.4% gain in February. March’s headline inflation rose at an annual clip of 5.0%, below expectations of 5.2%. Core CPI, which strips out food and energy, grew 5.6%, in line with expectations.
Today’s CPI takes some heat off the Fed, for now. Moderating price pressures combined with signs of cooling in the labor market will offer a temporary reprieve to markets,” Ronald Temple, Chief Market Strategist at Lazard, wrote following the release.
“While this is good news, it does not mean tightening is over. Core inflation remains far above the Fed’s target, and the path to 2% will be bumpy. With core CPI likely to end the year above 3%, the Fed has more work to do before it can declare victory over inflation,” Temple added.
Investors will continue to digest Wednesday’s CPI report as it could provide some clues to whether the Fed will continue to raise rates at its next meeting. Markets have priced in a 69% probability that the Federal Reserve will raise interest rates by another 0.25% in May, according to data from the CME Group. That moved down slightly compared to before the CPI report’s release.
On Tuesday, three Fed speakers weighed in on the prospect of another rate hike ahead of the May meeting. New York Fed President John Williams told Yahoo Finance’s Jennifer Schonberger that the Federal Reserve has its work cut out for it as the central bank tries to bring down inflation to the Fed’s goal of 2% amid a strong labor market and sticky price pressure.
Separately, Philadelphia Fed President Harker said that he wanted to “get rates above 5[%] and then sit there for a while,” which would imply at least one more 0.25% move.
Meanwhile, Chicago Fed President Austan Goolsbee struck a more dovish tone, suggesting that the Fed should proceed with caution when raising rates “too aggressively” until it can assess “ how much work the headwinds are doing for us in getting down inflation.”
Other key indicators from policymakers will be the release of the FOMC minutes from the March meeting on deck for Wednesday afternoon, as well as the rate decision from the Bank of Canada.
In single-stock moves, WW International, Inc. (WW) shares of the WeightWatchers parent slipped Wednesday morning following the news that the company closed its deal with a telehealth provider, which will help expand its footprint in the growing market for new obesity drugs.
Shares of Snowflake Inc. (SNOW) climbed more than 1% after the software services provider disclosed with the Securities and Exchange Commission (SEC) on Monday that executives and board members had donated and sold its shares.
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