key Takeaways:
- Stocks jumped higher as the latest CPI inflation data didn’t change outlooks on when the Fed will cut rates.
- Inflation was slightly hotter-than-expected, but investors consider Fed policy restrictive enough.
- Tech stocks led the surge, with Nvidia climbing over 6.6%.
Tech steered stock indexes higher on Tuesday, as fading inflationary fears drove investors back into markets.
The S&P 500 reached a fresh closing high today, propelled by the soaring performance of mega-cap names during the session. This surge followed the release of February’s inflation data, which had little impact on investors’ expectations regarding future rate cuts, anticipated to occur around the middle of this year.
Tuesday’s consumer price index slightly exceeded expectations, with most analysts still forecasting the Federal Reserve to initiate rate cuts during the summer months. Jeffrey Roach, Chief Economist for LPL Financial, noted that markets currently anticipate the first rate cut to take place in June, emphasizing that despite persistent inflation, current Fed policy remains restrictive.
According to data from the Bureau of Labor Statistics, inflation increased by 0.4% for the month and 3.2% year-over-year, aligning with projections for the monthly figure but surpassing expectations for the annual reading. Core inflation, which excludes volatile food and energy prices, also rose by 0.4%, slightly above the anticipated 0.3% gain.
Skyler Weinand, Chief Investment Officer at Regan Capital, commented on the situation, stating that the slight inflationary uptick presents uncertainty regarding the timing of potential rate cuts. He suggested that while there’s a possibility of a rate cut in June, the Fed might opt for a more cautious approach and delay until September. Weinand highlighted the challenges in achieving price stability, noting that while inflation has decelerated from 9% to 3% relatively quickly, reaching the Fed’s 2% target may take longer than expected.
Amidst renewed market activity, mega-cap tech stocks emerged as top performers, with notable gains observed in companies like Nvidia, which surged over 7%, along with Meta and Microsoft, which rose over 3% and 2.6%, respectively.
Looking ahead, investors will closely monitor Thursday’s release of the producer price index for further insights into inflationary trends.