Overnight on Wall Street, the benchmark S&P 500 Index surged 1.2 per cent to top its record high set in March. The Nasdaq Composite Index did even better, gaining 1.4 per cent to extend its record set a day earlier. The Dow Jones Industrial Average also gained 0.9 per cent to beat its high set in March.
US Treasury yields fell, making stocks more attractive, after a new economic report showed US inflation fell in April, compared with a month earlier.
The moves strengthened market expectations that the Federal Reserve may indeed cut its main interest rate this year.
Stocks that tend to benefit the most from lower rates led the sharemarket’s charge.
Big technology companies and other high-growth stocks rode the wave, with shares in artificial intelligence chipmaker Nvidia surging 3.6 per cent. Meta, owner of Facebook, rose 2 per cent, while Google owner Alphabet shared gained 1.1 per cent.
Loading
Real-estate stocks in the S&P 500 climbed 1.7 per cent, while stocks of electricity companies and other utilities rose 1.4 per cent. The dividends they pay look more attractive to investors when bonds are paying less interest.
The report sparking the increase in market sentiment showed the prices US consumers had to pay for petrol, car insurance and other goods and services were 3.4 per cent higher than the same period a year earlier. While still painful, it is not as bad as March’s inflation rate of 3.5 per cent.
Perhaps more importantly, the slowdown was a relief after reports for the consumer price index earlier this year had consistently been worse than expected.
“There was a lot relying on today’s CPI to prove that disinflation was simply delayed these last three months and not derailed,” according to Alexandra Wilson-Elizondo, co-chief investment officer of multi-asset solutions at Goldman Sachs Asset Management.
A separate report showed no growth in spending at US retailers in April, from March. It was a weaker showing than the 0.4 per cent growth economists expected.
Loading
Slowing retail sales is also a positive for markets because it could slow inflation.
On the losing end on Wall Street, meme stocks GameStop and AMC Entertainment plunged, as momentum reversed following their jaw-dropping starts to the week. GameStop fell 18.9 per cent, though it is still up 126.5 per cent so far this week.
AMC Entertainment sank 20 per cent after it said it would issue almost 23.3 million shares to wipe out $US163.9 million in debt.
In the bond market, the yield on the 10-year Treasury eased to 4.34 per cent, from 4.45 per cent late Tuesday. The two-year yield, which moves more closely with expectation for Fed action, sank to 4.72 per cent, from 4.82 per cent.
Traders are now forecasting a 95 per cent probability that the Fed will cut interest rates at least once this year, according to data from CME Group. That is up from just below 90 per cent a day earlier.
AP
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.