Wall Street Celebrates Record Highs as Inflation Fears Ease
Wall Street's major indexes soared to record highs on Wednesday, with the S&P 500 and Nasdaq both jumping over 1%. This surge was fueled by a smaller-than-expected rise in consumer inflation, which boosted investor confidence and raised hopes for interest rate cuts by the Federal Reserve.
The Dow Jones Industrial Average edged closer to the 40,000 milestone, while the Nasdaq Composite notched its second record close in as many days. Technology stocks led the charge, with the S&P 500's 11 major industry sectors mostly gaining ground.
The tepid April Consumer Price Index (CPI) data offered a glimmer of hope that inflation might be easing after a string of higher-than-expected numbers. This led traders to increase their bets on the Fed cutting rates in September and December.
"It's a relief we didn't have a fourth hot CPI report," said Carol Schleif, chief investment officer at the BMO family office in Minneapolis. "Clearly markets liked that the inflation numbers looked softer. Retail sales came in softer. It's pretty clear evidence that the economy came off the boil and is operating at a more sustainable pace."
Other data released on Wednesday showed that U.S. retail sales unexpectedly stalled in April, indicating a slowdown in consumer spending. This further supported the view that inflation might be peaking.
Equities extended their gains from Tuesday, when Fed Chair Jerome Powell's assessment of the U.S. economy reassured investors after hotter-than-expected producer prices for April. Stocks have rallied so far this year on better-than-expected first-quarter earnings and expectations that the Fed can manage inflation without damaging growth.
Investors are now looking to Walmart's quarterly report, due out on Thursday, for further insights into consumer spending. Meanwhile, meme stocks like GameStop and AMC Entertainment saw sharp declines after their recent rallies.