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Wall Street ended sharply higher on Tuesday, led by a broad-based stock rally. Inflation for May showed signs of slowing down, thereby raising hope that the Fed would take cognizance and finally announce a rate-hike pause from its ongoing June meeting. All three major indexes ended in the green.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.4% or 145.79 points to close at 34,212.12. Twenty components of the 30-stock index ended in positive territory, while 10 ended in negative.
The S&P 500 gained 0.7%, or 30.08 points, to close at 4,369.01. Ten of the 11 broad sectors of the benchmark index ended in positive territory. The Materials Select Sector SPDR (XLB), the Industrials Select Sector SPDR (XLI) and the Consumer Discretionary Select Sector SPDR (XLY) rose 2.3%, 1.2% and 1%, respectively, while the Utilities Select Sector SPDR (XLU) fell less than 1%.
The tech-heavy Nasdaq advanced 111.40 points, or 0.8%, to finish at 13,573.32.
The fear-gauge CBOE Volatility Index (VIX) was down 2.7% at 14.61. A total of 11.6 billion shares were traded on Tuesday, higher than the last 20-session average of 10.6 billion. Advancers outnumbered decliners on the S&P 500 by a 4-to-1 ratio. The S&P 500 recorded 43 new highs and no new lows, while the Nasdaq posted 135 new highs and 47 new lows.
Consumer Price Index Comes in Lower Than Expected
The U.S. Bureau of Labor Statistics reported on Tuesday that Consumer Price Index (CPI) rose 0.1% in May on a seasonally adjusted basis, after increasing 0.4% in April. This comes against a wide consensus estimate of a 0.2% increase for the period, and as a pleasant surprise. Over the last 12 months, all the items index increased 4%, its slowest annual increase since the 12-month period ending March 2021.
The index for all items less food and energy, also known as core CPI, rose 0.4% in May, as it did in April and March.
Fed Expected to Announce a Rate-Hike Pause
With the timely release of the consumer inflation indicator, the Fed is now firmly expected to finally announce a rate-hike pause from its ongoing June FOMC meeting. Interest rates have been raised 10 straight times since March 2022. Although this policy tightening has gone a long way in bringing inflation down from its June 2022 peak, it has also fostered uncertainty in the market about a gradual economic slowdown and a probable recession.
In recent weeks, the labor market has shown resilience amid a gradual slowdown. Now, with the CPI numbers showing sought-after price levels, it is widely anticipated that the Fed would revisit its tight monetary policy in June and announce a rate-hike pause. However, analysts expect another rate hike in July before holding for the rest of the year.
According to the CME Group’s FedWatch tool, investors are now pricing in a 93% chance that there will be no hike in June, and the rate will be held in the 5-5.25% range. Also, there is a 62% chance that rates will go up again in July.
This positive development pushed the S&P 500 and the Nasdaq Composite on Tuesday to notch up fresh 13-month highs. Both benchmark indexes had earlier reached their highest closing levels since April 2022 in the session before. Currently, the broad-market index is up about 25% from its October low, which is a tad above the basic definition of a bull market.
Image: Bigstock
Stock Market News for Jun 14, 2023
Wall Street ended sharply higher on Tuesday, led by a broad-based stock rally. Inflation for May showed signs of slowing down, thereby raising hope that the Fed would take cognizance and finally announce a rate-hike pause from its ongoing June meeting. All three major indexes ended in the green.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.4% or 145.79 points to close at 34,212.12. Twenty components of the 30-stock index ended in positive territory, while 10 ended in negative.
The S&P 500 gained 0.7%, or 30.08 points, to close at 4,369.01. Ten of the 11 broad sectors of the benchmark index ended in positive territory. The Materials Select Sector SPDR (XLB), the Industrials Select Sector SPDR (XLI) and the Consumer Discretionary Select Sector SPDR (XLY) rose 2.3%, 1.2% and 1%, respectively, while the Utilities Select Sector SPDR (XLU) fell less than 1%.
The tech-heavy Nasdaq advanced 111.40 points, or 0.8%, to finish at 13,573.32.
The fear-gauge CBOE Volatility Index (VIX) was down 2.7% at 14.61. A total of 11.6 billion shares were traded on Tuesday, higher than the last 20-session average of 10.6 billion. Advancers outnumbered decliners on the S&P 500 by a 4-to-1 ratio. The S&P 500 recorded 43 new highs and no new lows, while the Nasdaq posted 135 new highs and 47 new lows.
Consumer Price Index Comes in Lower Than Expected
The U.S. Bureau of Labor Statistics reported on Tuesday that Consumer Price Index (CPI) rose 0.1% in May on a seasonally adjusted basis, after increasing 0.4% in April. This comes against a wide consensus estimate of a 0.2% increase for the period, and as a pleasant surprise. Over the last 12 months, all the items index increased 4%, its slowest annual increase since the 12-month period ending March 2021.
The index for all items less food and energy, also known as core CPI, rose 0.4% in May, as it did in April and March.
Fed Expected to Announce a Rate-Hike Pause
With the timely release of the consumer inflation indicator, the Fed is now firmly expected to finally announce a rate-hike pause from its ongoing June FOMC meeting. Interest rates have been raised 10 straight times since March 2022. Although this policy tightening has gone a long way in bringing inflation down from its June 2022 peak, it has also fostered uncertainty in the market about a gradual economic slowdown and a probable recession.
In recent weeks, the labor market has shown resilience amid a gradual slowdown. Now, with the CPI numbers showing sought-after price levels, it is widely anticipated that the Fed would revisit its tight monetary policy in June and announce a rate-hike pause. However, analysts expect another rate hike in July before holding for the rest of the year.
According to the CME Group’s FedWatch tool, investors are now pricing in a 93% chance that there will be no hike in June, and the rate will be held in the 5-5.25% range. Also, there is a 62% chance that rates will go up again in July.
This positive development pushed the S&P 500 and the Nasdaq Composite on Tuesday to notch up fresh 13-month highs. Both benchmark indexes had earlier reached their highest closing levels since April 2022 in the session before. Currently, the broad-market index is up about 25% from its October low, which is a tad above the basic definition of a bull market.
Consequently, shares of Caterpillar Inc. (CAT - Free Report) and Tesla, Inc. (TSLA - Free Report) rose 3.2% and 3.6%, respectively. Caterpillar carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.