Wall Street boasts record closes as inflation data fuels rate-cut bets

There was multiple good news on the inflation front today. The valued CPI data came in soft, April retail sales came in soft, consumer spending came in soft, a triple whammy all in one day, all pointing to a cooling economy which today’s expert points out as “clear evidence that the economy came off the boil and is operating at a more sustainable pace.” It’s exactly what the market wanted as subsequently it also points to greater odds of a rate cut in both September and December. 

There were handsome 3-digit gains all around with the Dow and S&P hitting new records, the Dow closing in on the coveted 40,000 mark, and the Nasdaq striking a new record for the second day in a row. Yesterday, I speculated that a good CPI report would make volume go through the roof and indeed it did at 15.3 billion vs an 11.11 4-week average.  Usually, we don’t see those kinds of numbers except on “triple-witching” days. 

Wall Street boasts record closes as inflation data fuels rate-cut bets

By Sinéad Carew and Bansari Mayur Kamdar

Wed May 15, 2024 4:00 PM

DJ: 39,558.11  +126.60       NAS: 16,511.18  +122.94       S&P: 5,246.68  +25.26     5/14

DJ: 39,908.00  +349.89       NAS: 16,742.39  +231.21       S&P: 5,308.15  +61.47     5/15

May 15 (Reuters) - The benchmark S&P 500 (.SPX), opens new tab and the Nasdaq (.IXIC), opens new tab notched record closes on Wednesday, with both advancing more than 1%, after a smaller-than-expected rise in consumer inflation bolstered hopes for interest rate cuts by the Federal Reserve.  The blue-chip Dow (.DJI), opens new tab also boasted a record closing level and drew closer to the 40,000 milestone. All three of Wall Street's major indexes hit intraday records.  Tepid U.S. Consumer Price Index (CPI) data for April led traders to raise bets that the Fed will cut its policy rate in September and December.

"It's a relief we didn't have a fourth hot CPI report," said Carol Schleif, chief investment officer at the BMO family office in Minneapolis. "Clearly markets liked that the inflation numbers looked softer. Retail sales came in softer. It's pretty clear evidence that the economy came off the boil and is operating at a more sustainable pace."  Other data released on Wednesday showed U.S. retail sales were unexpectedly flat in April as higher gasoline prices pulled expenditure away from other goods, indicating that consumer spending was losing momentum. 

The Dow Jones Industrial Average (.DJI), opens new tab rose 349.89 points, or 0.88%, to 39,908.00 while the S&P 500 (.SPX), opens new tab gained 61.47 points, or 1.17%, at 5,308.15.  The Nasdaq Composite (.IXIC), opens new tab advanced 231.21 points, or 1.40%, to 16,742.39, its second record close in as many days. The S&P 500 and the Dow last registered record closing prices on March 28.

Equities built on Tuesday's gains, when Fed Chair Jerome Powell's assessment of U.S. growth, inflation and the interest rate outlook reassured investors after hotter-than-expected producer prices for April.

Stocks have rallied so far this year on better-than-expected first-quarter earnings and expectations that the Fed will be able to cool inflation without damaging growth and eventually transition to cutting interest rates.  Among megacap stocks, Nvidia (NVDA.O), opens new tab, Microsoft (MSFT.O), opens new tab and Apple (AAPL.O), opens new tab all advanced.  In earnings, Walmart (WMT.N), opens new tab was expected to provide more color on consumer spending when it reports results on Thursday. The retail giant's shares underperformed.  Retail investor darling GameStop (GME.N), opens new tab snapped this week's sharp rally driven by "Roaring Kitty" Keith Gill, a central figure behind the 2021 meme stock frenzy, who posted bullish comments on social media platform X.  Other meme stocks such as AMC Entertainment (AMC.N), opens new tab and Koss Corp (KOSS.O), opens new tab also fell. 

Trading volume was brisk with 14.78 billion shares changing hands on U.S. exchanges, according to the latest tally, compared with the 11.11 billion average for the last 20 sessions.  (But per the CBOE, volume came in a 15.3 billion.) 

Advancing issues outnumbered decliners by a 3.02-to-1 ratio on the NYSE, which had 645 new highs and 40 new lows.  On the Nasdaq advancing issues outnumbered decliners by a 1.69-to-1 ratio while it recorded 285 new highs and 76 new lows. The S&P 500 posted 71 new 52-week highs and no new lows.