US Stock Market Hits Record High as Inflation Slows and Retail Sales Stall
The US stock market has reached a new record high, breaking above 5,300 for the first time, as investors react positively to the latest inflation and retail sales data. The market is now pricing in two full rate cuts from the Fed this year.
US Stock Market Hits Record High as Inflation Slows and Retail Sales Stall
The US stock market reached new heights on Wednesday, with the S&P 500 breaking above 5,300 for the first time, as investors reacted positively to the latest inflation and retail sales data. The Dow Jones Industrial Average rose 0.88% to 39,908.0, while the Nasdaq Composite Index increased by 1.40% to 16,742.39, also hitting a record high.
Inflation and Retail Sales
The US CPI report for April showed that inflation is slowing, with the annual rate for headline price growth falling to 3.4% from 3.5%. The core rate declined to 3.6% from 3.8%. Advanced retail sales were flat last month, while core retail sales fell by 0.1% on the month. These numbers were mostly in line with expectations, but the market reaction suggests that investors are optimistic about the prospects for future rate cuts.
Market Reaction
The market reaction to this data was swift, with 2-year Treasury bond yields plunging to their lowest level since early April. The dollar index also extended its decline, falling back below 105.00. This suggests that expectations for Fed rate cuts will be pushed forward, as inflation slows and the US consumer starts to look shaky.
Fed Rate Cuts
The CME Fedwatch tool is now expecting a 30% chance of a 25bp rate cut in July, and the market is pricing in a more than 50% chance of a cut in September. This is a significant shift from Tuesday's expectations and suggests that investors are increasingly confident that the Fed will act to support the economy.
Stock Market
The S&P 500's break above 5,300 is a significant milestone and suggests that the market is optimistic about the future prospects for the US economy. The positive reaction to the inflation and retail sales data suggests that investors are willing to overlook the current weakness in the US consumer, and are instead focusing on the potential for future growth.
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