US stocks rose on Wednesday after inflation data showed consumer price gains cooled in March.
At 12:15 pm ET, the S&P 500 (^GSPC) added 0.22%, while The Dow Jones Industrial Average (^DJI) gained 0.3%. The high-tech Nasdaq Composite (^IXIC) ticked above the flat line.
Bond returns were mixed. The yield on the 10-year note dipped to 3.42%, while the yield on the rate-sensitive two-year note fell to 4.0% on Wednesday morning.
March CPI showed price gains cooled last month in the slowest rise since May 2021. The Consumer Price Index rose 0.1% in March, a slower pace than the 0.1% rise. 4% in February. Headline inflation in March increased at an annual rate of 5.0%, below expectations of 5.2%.
The core CPI, which excludes food and energy, grew by 5.6%, in line with expectations. Meanwhile, housing costs remain a key driver of inflation, according to BLS data, even as the housing market stabilizes.
“Today’s CPI takes some of the pressure off the Fed, for now. Moderation in price pressures combined with signs of cooling in the labor market will offer temporary respite to markets,” Ronald Temple, chief market strategist at Lazard, wrote after the statement.
“While this is good news, it doesn’t mean the tightening is over. Core inflation remains well above the Fed’s target, and the path to 2% will be bumpy. Given that core CPI is likely to end year above 3%, the Fed has more work to do before it can declare victory over inflation,” Temple added.
Investors will continue to digest Wednesday’s CPI report as it could provide some clues as to whether the Fed will continue to raise rates at its next meeting. Markets have priced in a 69% probability that the Federal Reserve will raise interest rates another 0.25% in May, according to data from CME Group. That’s down slightly compared to before the CPI report was released.
The latest Fedspeak came from San Francisco Fed President Mary Daly on Wednesday. Daly was speaking for the first time since the collapse of Silicon Valley Bank, an institution that was supervised by the San Francisco Federal Reserve. Daly said that “the full impact of this policy tightening is still working its way through the system.”
In addition, “the strength of the economy and elevated inflation readings suggest there is more work to be done,” he said.
On Tuesday, three Fed speakers weighed in on the possibility of another rate hike before the May meeting. New York Fed President John Williams told Yahoo Finance’s Jennifer Schonberger that the Federal Reserve has a lot of work to do as the central bank tries to reduce inflation to the Fed’s target of 2% amid a market strong labor force and rigid price pressure.
Separately, Philadelphia Fed President Harker said he wanted to “get rates above 5[%] and then sit there for a while,” which would imply at least one more 0.25% move.
Meanwhile, Chicago Fed President Austan Goolsbee took a more dovish tone, suggesting the Fed should proceed cautiously in raising rates “too aggressively” until it can assess “how much work headwinds are doing for us.” to reduce inflation.
Other key indicators for policymakers will be the release of the FOMC March meeting minutes by Wednesday afternoon, as well as the Bank of Canada rate decision.
In individual stock moves, shares of American Airlines Group Inc. (AAL) fell 9% after the airline giant said on Wednesday that first-quarter earnings could be below expectations as the company it faces obstacles with higher costs. Shares of United Airlines Holdings, Inc. (UAL) also fell more than 5%.
Shares of Shopify Inc. (SHOP) rose on Wednesday after JMP Securities upgraded the e-commerce company’s rating to outperform and set a $65 price target.
Shares of Triton International Limited (TRTN) rose more than 30% after Brookfield Infrastructure Partners LP announced it would acquire Triton in a $13.3 billion deal.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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