Stocks Rise as Traders Assess Rate Outlook and Dollar Weakens
Global Stock Indexes and Treasury Yields
Global stock indexes have edged higher while Treasury yields slipped on Wednesday. Investors are trying to assess the timing of possible interest rate cuts from the Federal Reserve, while the dollar eased off of a three-month peak against the yen.
Japan’s Currency Officials and Nvidia Shares
Japan’s top currency officials warned against what they described as rapid and speculative yen moves overnight. Meanwhile, Nvidia shares rose 2.5% and the dominant AI chip maker overtook Alphabet’s market capitalization. Nvidia, which reports quarterly results next week, now has a stock market value of $1.825 trillion.
Fed’s Path to Inflation Target and Market Expectations
Yields briefly extended declines after Chicago Fed President Austan Goolsbee said the Fed’s path to its 2% inflation target rate would remain on track even if price increases run a bit hotter than expected over the next few months. Market expectations for a cut by the Fed in June of at least 25 basis points stand at 78.5%, according to CME’s FedWatch Tool, while expectations for a cut in May have fallen to 38.5%, down from 63.7% a week ago.
U.S. Inflation and Market Reaction
An upside surprise in U.S. inflation on Tuesday showed the consumer price index (CPI) rose 3.1% on an annual basis, above forecasts for a 2.9% increase. With the CPI report, “it wasn’t as if inflation held, it was that it accelerated, and that was what got the market. Suddenly the expectations (on possible rate cuts) pulled back even more,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
Upcoming Economic Data and Market Performance
Thursday brings U.S. retail sales data, while on Friday the U.S. producer price index report will be released. The S&P 500 rose 151.52 points, the Dow gained 47.45 points, and the Nasdaq gained 203.55 points. MSCI’s gauge of stocks across the globe rose 5.37 points, or 0.73%, while Europe’s index rose 0.5%. The yield on the 10-year Treasury note fell 5 basis points to 4.267% after touching 4.332% earlier in the session, its highest since Dec. 1.
Foreign Exchange Market and Cryptocurrencies
The dollar weakened 0.12% against the Japanese yen, while the euro was up 0.15% at 1.0725. In cryptocurrencies, bitcoin gained 4.16% at $51,626.95.
Oil Futures and Precious Metals
Oil futures declined as higher inventories weighed on prices. U.S. crude lost $1.23 to settle at $76.64 a barrel and Brent crude fell $1.17 to settle at $81.60. Gold was steady at $1,991.92 per ounce.
