5/16/2024

Wall Street closes with a record on CPI data

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Key points:

  • All three major Wall Street indexes closed at records, with the S&P 500 and Nasdaq up more than 1%.
  • US CPI data for April was lower than expected, which strengthened investors’ faith in a possible Fed interest rate cut.
  • Nvidia shares rose 3.6% on bullish forecasts for demand for artificial intelligence technology.

All three major Wall Street indexes posted impressive gains, closing at record levels. Consumer inflation was below forecasts, strengthening investors’ faith in a possible interest rate cut by the Federal Reserve.

The S&P 500 and Nasdaq rose more than 1%, and the blue-chip Dow Jones index neared a landmark 40,000 mark. Technology stocks led the gains, pushing all three indexes to intraday record highs.

The Dow Jones Industrial Average rose 349.89 points, or 0.88%, to 39,908.00. The S&P 500 added 61.47 points, or 1.17%, to 5,308.15. The Nasdaq Composite rose 231.21 points, or 1.40%, to 16,742.39, its second record close in as many days.

CPI data supported traders’ optimism

Below-expected April data on the US consumer price index (CPI) fueled investor optimism as inflation slowed after three months of beating expectations. The market reacted positively to these data, as evidenced by the growing hopes that the Fed will lower the key rate in September and December of this year.

However, retail sales data, also released on Wednesday, was unexpectedly weak, with sales unchanged from the previous month. The decline in retail sales is likely due to rising gasoline prices, which has reduced consumer spending on other goods. This could be a sign that the US economy is slowing down and moving towards a more sustainable pace of growth.

Nvidia is back in the lead

U.S. stocks rallied on Tuesday after Federal Reserve Chairman Jerome Powell presented his assessment of U.S. economic growth, inflation and the outlook for interest rates. Powell’s announcement reassured investors who were concerned about stronger-than-expected April producer price index data.

Stocks have rallied this year on beating company earnings estimates for the first quarter and expectations that the Fed will be able to contain inflation without hurting economic growth and move to lower interest rates later.

Among mega-cap stocks, the biggest contributor to the S&P 500 was Nvidia, which rose 3.6%. Microsoft was the second biggest gainer, adding 1.7%, while Apple added 1.2%.

The leader in percentage growth in the S&P 500 was Super Micro Computer Inc, whose shares rose 15.8%. Super Micro, like Nvidia, is seen as a lucrative bet on soaring demand for artificial intelligence technology.

Investors were eagerly awaiting Walmart’s quarterly consumer spending report, due Thursday. Shares of the retail giant fell 0.05%, marking their third straight decline.

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