Stocks jump as investors applaud colder CPI data

U.S. stocks rallied on Wednesday as Wall Street breathed a sigh of relief over weaker-than-expected inflation for July.

The benchmark S&P 500 index jumped 1.9%, while the Dow Jones Industrial Average jumped 470 points, or about 1.4%. The tech-heavy Nasdaq Composite gained 2.5%.

July’s CPI report showed prices moderated last month, falling slightly for the first time since the start of 2021, an encouraging sign for investors that Federal Reserve officials may reduce the magnitude of price shocks. interest rate hikes.

Data from the Bureau of Labor Statistics indicated that prices paid by consumers rose 8.5% last month on the year, reflecting a moderation from June’s 40-year high of 9.1%. Consensus economists expected last month’s reading to show an 8.7% increase, according to estimates compiled by Bloomberg.

In bond markets, improving consumer price data led Treasury yields to fall as investors reduced their bets on how much monetary tightening policymakers should do. The 10-year Treasury note fell about 4 basis points to 2.76%, while the benchmark two-year Treasury note plunged 12 basis points to 3.17%.

“It’s a step in the right direction, but bear in mind that we have many miles ahead of us before inflation normalizes,” said Mike Loewengart, managing director of investment strategy at E * Morgan Stanley’s TRADE in an emailed note. “However, a one-month data point doesn’t trend, so cautious optimism is probably the name of the game.”

A downward trend in gasoline prices for more than 50 straight days brought relief to U.S. consumers last month after record high energy costs pushed inflation to a cycle high in June, but Inflationary pressures remained strong in the other components of the report.

Core CPI, which excludes the volatile food and energy components from the report, remained firm in the latest reading, climbing at an annual rate of 5.9%, unchanged from the June figure.

HOUSTON, TEXAS – JULY 15: A customer shops at a Kroger grocery store on July 15, 2022 in Houston, Texas. U.S. retail sales rose 1.0% in June, according to the Commerce Department, as consumers spent more on a range of goods including gasoline, groceries and furniture. (Photo by Brandon Bell/Getty Images)

Elsewhere on investors’ radars, Elon Musk sold $6.9 billion worth of Tesla (TSLA) stock on Tuesday night after the electric carmaker’s CEO said he was done selling shares in the company . Musk said in a tweet that he wanted to avoid an emergency sale of Tesla stock in case he was forced to pursue his deal to acquire Twitter (TWTR).

On the earnings front, Coinbase (COIN) shares rose 4%, buoyed by the rally in broader markets, even after the cryptocurrency exchange announced second-quarter results on Tuesday afternoon. below Wall Street estimates and said user growth had slowed and was expected to fall further for the rest of this year.

Meanwhile, Roblox (RBLX) took a hit on Wednesday following a severe setback on second-quarter results as consumers cut discretionary spending and the gaming industry sees a slowdown in the boom fueled by the pandemic. The shares fell 4%.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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