4:10pm: Record-breaking session
The three major US stock indexes all closed at new record highs as rate cut expectations were boosted by a softer CPI report.
The S&P 500 finished the day above 5,300 for the first time, adding 1.2% at 5,308 points.
The Dow Jones added almost 350 points or 0.9% at 39,908 points and the Nasdaq gained 1.4% at 16,742 points.
As the meme stock rally of the last three days faded, GameStop shares retreated by 18% and AMC was down 20% at the closing bell on Wednesday.
2.03pm: Nasdaq and S&P continue charge
The Nasdaq and S&P 500 continued on record-breaking streaks into Wednesday lunchtime, as Wall Street was lifted by the day’s earlier softer-than-expected inflation data for April.
Up 205 points, the Nasdaq was at an intraday record of 16,716, while the S&P jumped 53 points to its latest high of 5,299.
The Dow Jones also climbed as April’s 0.3% rise in prices appeared to calm nerves that rate cuts may be way off, by 278 points to 39,836.
Bret Kenwell, analyst at eToro, equated the consumer inflation print to a “Goldilocks report” for the equity market.
“The not-too-hot report should boost investor confidence that we could see more than one rate cut from the Fed this year,” he said.
“Coming into 2024, the bond market was pricing in upwards of six rate cuts this year.
“Now teetering between one or two cuts, an in-line inflation report should tip the scales toward the latter, while potentially allowing the discussion for three cuts.”
Among companies, declines of 24.3% and 19.5% for GameStop Corp (NYSE:GME) and AMC Entertainment Holdings (NYSE:AMC) respectively looked to solidify the end of the latest meme stock craze.
Monday.com Ltd soared in the meantime, by 18.8%, after the cloud-based platform provider dealt a first-quarter earnings beat and hiked expectations for the year.
12.01pm: Wall Street eyes new highs
The S&P 500 and Nasdaq continued in record-breaking territory on Wednesday afternoon following a softer-than-expected consumer inflation read for April earlier in the day.
By the afternoon, the S&P 500 was up 44 points at 5,291, just off a new intraday record of 5,292, seen earlier in the day.
The Nasdaq set a new intraday high too, up 166 points at 16,677, while the Dow Jones continued to edge towards the 40,000 mark with a 247-point gain to reach 39,805.
“Today’s US inflation data has lit a fire under equities once again, coming in below expectations for the monthly figure,” IG analysts noted.
The data had shown headline US consumer prices up 0.3% in the month to April, against consensus estimates for 0.4% and a 0.4% rise in March.
“The key event of the week had acted as a stumbling block to further upside for stocks, but today’s figure has helped to cancel out the jitters,” IG added.
10am: Wall Street starts higher after inflation data
Wall Street's main stock indexes have started higher after US inflation data refrained from throwing any new spanners in the Fed's works.
The S&P 500 has risen 18 points or 0.35%, hitting a new all-time intraday high in early trading.
Similarly, the Dow Jones rose 0.37% and the Nasdaq Composite 0.27%.
Meanwhile, meme stocks were on the way down, with GameStop halted by the circuit-breaker, hitting limit-down after a big selloff.
What goes up, must go down. Has the meme stock rally already fizzled out? GameStop down 25% today. @XTBUK
— kathleen brooks (@KATHLEENBROOKS) May 15, 2024
9.16am: CPI thoughts
Some reactions to the CPI print and retail sales data.
"The good news is that CPI hasn’t reaccelerated and, most importantly, it was less-than-expected month-over-month (e.g. 0.3% vs 0.4%), but the bad news is that consumers seem to be reducing their spending," says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in Charlotte, NC.
"On balance, we think it’s a positive that inflation is moderating and although a slowdown in spending could turn into a problem for the economy, in the immediate term it takes some pressure off the Fed and that is what has been moving bond and stock markets the past couple of months."
Paul Ashworth, Capital Economics' chief North America economist says, "All things considered, this is consistent with the Fed cutting interest rates in September.
"The slightly more modest 0.3% m/m increase in core CPI in April was even better than it looked, particularly given that we already know the PPI components that feed into the Fed’s preferred PCE deflator measure came in, on balance, weaker than expected."
Looking at the flat retail sales data, while core retail sales, which strip out autos and gas, fell by 0.1% after a very strong February and March, Kathleen Brooks at XTB said some pullback was to be expected.
"One month’s worth of data does not mean that the US consumer is cracking under the pressure of higher interest rates, but it is something to watch."
She noted that 2-year Treasury bond yields plunged on the back of this double whammy of data, and are currently down 8 basis points, to their lowest level since early April.
"The dollar index is also extending its decline and is back below 105.00. The market reaction to this data seems to suggest that expectations for Fed rate cuts will be pushed forward, as inflation is slowing at the same time as the US consumer starts to look shaky."
There was an immediate but minor re-pricing of Fed rate cut expectations, with the CME Fedwatch tool expecting a 30% chance of a 25bp rate cut in July, up from a 26% chance of a cut yesterday.
"The market is now expecting the first rate cut to come in September, with a more than 50% chance of a cut currently priced in, up from a 48% chance last week," Brooks said.
8.49am: S&P and other indices spike after CPI
S&P 500 futures and those for other key equity have jumped after the US inflation data came out, mostly in-line or lower than with expectations.
The headline US CPI was up 0.3% in April compared to March, according to the report from the US Bureau of Labor Statistics, which was less than the 0.4% consensus estimate, down from 0.4% in March.
Compared to a year ago, US CPI was up 3.4%, as forecast, down from 3.5% a month ago.
Core CPI, which excludes food and energy was up 0.3% on the month, as predicted, and up 3.6% on the year, also in line with consensus down from 3.8%.
S&P 500 futures are up 0.55%, while Nasdaq futures are now up 0.58% and Dow futures up 0.49%.
Federal Reserve liquidity swaps, which are a way of reading market expectations of US central bank policy, showed markets saw a faster pace of rate cuts in September and December this year.
Traders also slightly added to ECB and Bank of England easing bets this year.
UK rate futures fully price in two 25 bps rate cuts by the BoE's monetary policy committee by November, up slightly from 47 basis points of cuts before the data, while the ECB pricing moved to 73 basis points of cuts in 2024 up from 71 bps before.
As well as the CPI data, US retail sales figures also came out, showing a 3.04% rise, softening from 4.27% the previous month.
7.52am: Stock futures cautious
Wall Street stocks are heading for a cautious start ahead of the CPI print in just over an hour.
Futures trading for the Dow Jones and S&P 500 are both pointing to a just-above-flat start, up 0.02%, while Nasdaq 100 futures are similarly modestly lower, down 0.05%.
Looking at individual stocks, the tech megacaps are all little-moved in premarket trading, while this week's big movers, GameStop and AMC Entertainment, are also becalmed after been up around 5% and 10% in recent hours.
The meme stock rally can't have run out of breath already can it?
None of the memes finished close to the pre-mkt heights yesterday, analysts noted, with most trades being small retail investor orders.
"Today sees the release of the latest US inflation update covering April," said market analyst David Morrison at Trade Nation, adding that "traders appear to be positioning themselves for a lower CPI number"
Economists and other forecasters think the US core CPI rose 0.30% in April, which would lower the 12-month rate to 3.6% from 3.8% in March.
Headline CPI is projected to have risen 0.37% in April, taking the 12-month rate to 3.4% from 3.5% in March.
"Given the current bullish sentiment in equities, [CPI coming in line with expectations] should be enough to trigger a rally, at least in the short term," said Morrison.
"If so, it could see the major indices take out their record highs from the end of March. The NASDAQ 100 is tantalisingly close, as is the S&P 500. But then the question is: how much more upside is there, given that inflation remains way above target?"
The US dollar is likely to move on the back of the CPI, which could also move gold, says Fawad Razaqzad at City Index, though the reaction of precious metals is hard to predict.
Recent dollar selling "could accelerate in the event we see a bigger drop in CPI than expected," he said.
"A weaker dollar would further increase the appeal of precious metals. However, that’s not to say gold will necessarily drop should we see a hotter inflation report."