With investors responding positively to a pivotal report on consumer price inflation, stocks surged significantly higher on Wednesday. Both the Nasdaq and the S&P 500 extended their gains from the previous two sessions, reaching new record intraday highs.
Currently, the Nasdaq is up 303.97 points or 1.8 percent at 17,647.52, and the S&P 500 is up 62.62 points or 1.2 percent at 5,437.94. Meanwhile, the Dow is posting a more restrained gain, up 205.82 points or 0.5 percent at 38,953.24.
The rally on Wall Street follows the release of a Labor Department report indicating that U.S. consumer prices remained unexpectedly flat in May.
According to the report, the consumer price index (CPI) remained unchanged in May after increasing by 0.3 percent in April. Economists had projected a modest increase of 0.1 percent.
The unchanged reading was influenced by a 3.5 percent decline in gasoline prices, which helped to counterbalance a continued rise in shelter prices.
Excluding food and energy prices, core consumer prices edged up by 0.2 percent in May after a 0.3 percent increase in April. Core prices were anticipated to rise by another 0.3 percent.
Additionally, the report highlighted that the annual rate of consumer price growth slowed to 3.3 percent in May from 3.4 percent in April, contrary to economists' expectations that the growth rate would remain unchanged.
The annual rate of core consumer price growth also decelerated, falling to 3.4 percent in May from 3.6 percent in April. Expectations had set the growth rate to dip to 3.5 percent.
These lower-than-expected annual growth rates are likely to foster renewed optimism regarding the outlook for interest rates ahead of this afternoon’s monetary policy announcement by the Federal Reserve.
Quincy Krosby, Chief Global Strategist at LPL Financial, stated that the data should enable the Fed to present a "more positive view regarding monetary easing while reiterating their commitment to data dependency and the necessity for further confirmation that inflation continues its downward trend."
“Given that data releases are scrutinized through the Fed’s perspective and the likelihood of rate cuts, the CPI report should emphasize that the Fed is edging closer to commencing the rate easing cycle,” she added.
Though the Fed is widely anticipated to maintain the current interest rates, traders will likely closely scrutinize the accompanying statement and the latest economic and interest rate projections from officials.
### Sector News
Rate-sensitive housing stocks have experienced a notable uptick, leading to a 4.6 percent increase in the Philadelphia Housing Sector Index.
Significant strength is also apparent in semiconductor stocks, as reflected by the 2.8 percent jump in the Philadelphia Semiconductor Index.
Airline stocks have shown a substantial upward movement, with the NYSE Arca Airline Index climbing by 2.7 percent.
Banking, commercial real estate, and computer hardware stocks are also exhibiting considerable strength, moving higher in sync with most other major sectors.
### Other Markets
In overseas trading, stock markets across the Asia-Pacific region delivered mixed results on Wednesday. Japan’s Nikkei 225 Index declined by 0.7 percent, while China’s Shanghai Composite Index increased by 0.3 percent.
Conversely, major European markets have all seen significant gains. The German DAX Index has surged by 1.5 percent, the French CAC 40 Index is up by 1.0 percent, and the U.K.’s FTSE 100 Index has increased by 0.8 percent.
In the bond market, treasuries have surged in response to the consumer price inflation data. Consequently, the yield on the benchmark ten-year note, which moves inversely to its price, has dropped by 13.1 basis points to 4.271 percent.
