Wall Street got a boost early on Wednesday after the government reported that consumer inflation in the U.S. cooled slightly in April, raising hopes that the Federal Reserve could cut interest rates soon.
Futures for the S&P 500 rose 0.5% and the Dow Jones Industrial Average climbed 0.4% less than an hour before Wednesday’s opening bell. Both had been flat before the data release.
The government also reported early Wednesday that retail sales in April were unchanged from March as inflation continued to make consumers think twice about their spending. The tepid spending at retail outlets is another data point that the Fed could point to if it decides to cut rates in the coming months as investors hope.
The U.S. central bank began raising its benchmark borrowing rate in March of 2022 in an attempt to stifle the inflation that took hold in the wake of the pandemic. The Fed’s rate is at its highest level in 23 years.
Inflation had been unexpectedly high in the first three months of this year after having steadily dropped in the second half of 2023. The elevated readings had dimmed hopes that the worst bout of inflation in four decades was being rapidly tamed.
A report Tuesday showed that prices remain stubbornly high at the wholesale level, before prices changes are passed on to consumers. The producer price index reading for April reached 0.5%, higher than forecast.
Elsewhere, in Europe at midday, Britain’s FTSE 100 was up 0.3% after hitting a record high in early trading. Germany’s DAX was up 0.7% and the CAC 40 in Paris was flat.
In Asian trading, Tokyo’s Nikkei 225 index climbed 0.1% to 38,385.73 and Australia’s S&P/ASX 200 advanced 0.4% to 7,753.70.
The Shanghai Composite index slipped 0.8% to 3,119.90 after the central bank kept a key lending rate unchanged Wednesday, signaling Beijing’s focus on maintaining monetary stability.
Taiwan’s Taiex gained 0.8%. In Bangkok, the SET lost 0.6%.
Markets in South Korea and Hong Kong were closed for holidays.
Bond yields edged lower. The yield on the 10-year Treasury slipped to 4.43% Wednesday from 4.49% late Monday.
Investors have been curtailing their expectations for the speed and frequency of interest rate cuts this year as inflation remains hotter than expected. Traders are betting on one or two rate cuts this year, according to data from CME Group.
Wall Street is still hoping the Fed can pull off its “soft landing,” where high interest rates work to cool inflation without slowing the economy into a recession. The economy remains strong, but consumers might be showing signs of fatigue under the weight of stubborn inflation.
In other trading, benchmark U.S. crude slipped 14 cents to $77.88 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost 21 cents to $82.17 a barrel.
The U.S. dollar slipped to 155.15 Japanese yen from 156.42 yen. The euro cost $1.0864, up from $1.0820.
On Tuesday, the S&P 500 index rose 0.5% and the Dow Jones Industrial Average rose 0.3%.
The Nasdaq composite, which is heavily influenced by technology stocks, jumped 0.8% to 16,511.18, its highest close ever. The tech sector has been a driving force for much of the broader market’s gains this year.
