U.S. stocks rally amid hopes CPI data marks inflation peak


U.S. stocks rose Tuesday as investors focused on a report showing so-called core inflation slowing even as consumer prices rose by the fastest rate in 40 years.

What’s happening
  • The Dow Jones Industrial Average
    rose 176 points, or 0.5%, to 34,484.

  • The S&P 500
    was up 28 points, or 0.6%, at 4,441.

  • The Nasdaq Composite
    advanced 126 points, or 0.9%, to 13,538.

On Monday, the Dow fell 413 points, or 1.2%, while the S&P 500 declined 1.7% and the Nasdaq Composite dropped 2.2%. The S&P 500 ended the session down 7% on the year.

What’s driving markets

U.S. consumer prices rose 1.2% in March, the Labor Department reported on Tuesday. Year over year, prices rose 8.5% — the fastest pace since January 1982.

But the news that cheered investors was that core price growth slowed to a 0.3% monthly rise versus expectations for a 0.5% increase. That still nudged the year-over-year rate to a 40-year high of 6.5%.

“The best you can say is that core CPI came in lower than expected at ‘only’ 6.5%,” said Matt Peron, director of research at Janus Henderson Investors. “That might give some relief to markets which were preparing for the worst.”

The key, he said, is whether inflation has peaked and, if so, how fast it will decline. “While this reading probably locks in a more aggressive Fed action near-term, there is some reason to believe that CPI will decline enough by year-end to avoid the most severe Fed action.”

Read: Inflation in March ran hotter than expected. Here’s the good news.

The yield on the benchmark 10-year Treasury
which on Monday reached a three-year high, dropped nearly 7 basis points to around 2.70%. The surge in yields has been making stocks less attractive on a relative basis and has weighed in particular on technology and other so-called growth shares whose valuations are based on earnings and cash flow far into the future.

Investors were also awaiting the unofficial kickoff of earnings season on Wednesday, with results due from JPMorgan Chase & Co.
while other big Wall Street banks were due to report on Thursday.

Earnings Outlook: U.S. banks are facing body blows from Ukraine war and a slump in investment banking activity

Companies in focus
  • Shares of CarMax Inc.
    fell 5% after the used-car retailer missed fiscal fourth-quarter profit estimates, offsetting a revenue beat.

How other assets are trading
  • The ICE U.S. Dollar Index
    a measure of the currency against a basket of six major rivals, was down 0.1%.

  • Oil futures bounced sharply higher, with the U.S. benchmark
    up 6.7% at $100.61 a barrel. Gold futures
    rose 1.7% to trade above $1,981 an ounce.

  • The Stoxx Europe 600
    fell 0.5%, while London’s FTSE 100
    declined 0.6%.

  • The Shanghai Composite
    rose 1.5%, while the Hang Seng Index
    rose 0.5% in Hong Kong and Japan’s Nikkei 225
    slumped 1.8%.



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