Wall Street Jumps To All-Time Highs On Soft Inflation, Bond Yields Tumble, Bitcoin Soars, Meme Stocks Face Carnage: What's Driving Markets Wednesday?

The S&P 500 and the Nasdaq 100 indices rose to fresh record highs during morning trading on Wednesday following a broadly in-line inflation report and cooler-than-expected retail sales data for April, as traders increased their rate cut bets.

Inflation calculated on the Consumer Price Index (CPI) basket came in at 3.4% year-on-year in April 2024, matching estimates and snapping a streak of three consecutive months of hotter-than-expected readings.

Market-implied probabilities on the Federal Reserve enacting a rate cut as early as September 2024 rose to over 70%, according to CME Group’s FedWatch Tool. Cumulatively, traders are now fully pricing in two rate cuts of 25 basis points by year end.

The rate-sensitive 2-year Treasury yields tumbled to 4.75%, down by 7 basis points, marking a notable break below its 200-day moving average.

The U.S. dollar fell across the board vis-à-vis other major currencies, with the greenback losing as much as 1% against the low-yielding Japanese yen.

Among sectors, both tech and real estate rallied the most, given their high sensitivity to interest rates. Top industry performers were homebuilders, as tracked by the iShares U.S. Home Construction ETF ITB, up 3.2%. Chipmakers, as tracked by the VanEck Semiconductor ETF SMH followed suit, up 2.2%.

Small caps, as tracked by the iShares Russell 2000 ETF IWM, also rallied, up by 1%.

Meme-tied stocks, such as AMC Entertainment Holdings Inc. AMC and GameStop Inc. GME, plummeted 23% and 31%, respectively. Wednesday’s negative price actions caused the two stocks to retrace more than half of the wild bullish trend that began on Monday.

In the commodities space, precious metals soared with gold and silver up 1.3% and 3%, respectively. Crude softened 0.3%.

Among cryptocurrencies, Bitcoin BTC/USD marked a 5.5% gain.

Wednesday’s Performance In Major US Indices, ETFs

Major Indices	Price	1-day %chg
Russell 2000	2,105.02	1.0%
Nasdaq 100	18,496.99	1.0%
S&P 500	5,289.66	0.8%
Dow Jones	39,746.97	0.5%

The SPDR S&P 500 ETF Trust SPY roared 0.9% to $528.94, the SPDR Dow Jones Industrial Average DIA was 0.6% up to $398.24 and the tech-heavy Invesco QQQ Trust QQQ was up 1.2% to $451.04, according to Benzinga Pro data. 

Sector-wise, the Technology Select Sector SPDR Fund XLK and the Real Estate Select Sector SPDR Fund XLRE outperformed, both up by 1.8%. The Energy Select Sector SPDR Fund XLE was the only one trading in the red, down 0.1%.

Wednesday’s Stock Movers

• Bitcoin-linked Super Micro Computer Inc. SMCI rallied over 10%, after boasting a 5% surge on Tuesday.
• Hertz Global Holdings Inc. HTZ tanked nearly 10% after reports that the car-hire company could face liquidity challenges as early as next year.
• Major EV players sold off substantially amid rumors China is contemplating a reaction to a U.S. tariffs increase. Both Rivian Automotive Inc. RIVN and NIO Group Inc. NIO tumbled 9%, Lucid Group Inc. LCID plummeted 8%, XPeng Inc. XPEV fell 4%, and Tesla Inc. TSLA dropped by 1.3%.
• Exxon Mobil Corp. XOM inched 0.5% higher, after Morgan Stanley updated its rating assessment to Overweight.
• Petco Health & Fitness Company Inc. WOOF rallied over 20% after the company introduced  Glenn Murphy as executive chairman of its board, who formerly worked for Lululemon Athletica Inc. LULU and Gap Inc. GPS

Read now: Economists React To Inflation, Retail Sales: ‘The Soft Landing Narrative Is Still A Possibility But Not A Guarantee’

Image generated using artificial intelligence via Midjourney.