The stock market is jittery after early excitement at the release of March inflation data faded throughout Wednesday's session, as investors worry the future of the Federal Reserve's monetary policies, with the minutes of the most recent FOMC meeting due Wednesday afternoon.
The U.S. inflation rate slowed more than expected to 5% year-on-year in March, marking the lowest print since May 2021. Core inflation remained hot, ticking up from 5.5% in February to 5.6%, matching predictions. The Fed's Tom Barkin said inflation has peaked but the Fed "still have a ways to go" to get it under control.
Investors presently estimate a 75% chance of another Fed interest rate rise in May, but expect this will be the final lift, with a first rate cut factored in as early as July.
Cues From Wednesday's Trading:
Stocks were volatile on Wednesday. Following the inflation report, major U.S. market indices soared before reversing the majority of gains in noon trade.
The S&P 500 index was 0.2% higher on the day, but 0.8% lower than intraday highs. The Nasdaq 100 was flat, shedding 1.2% from intraday highs. The Dow Jones Industrial Average held steady, posting a 0.3% gain and remaining not too far from daily highs.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq Composite | +0.05% | 12,038.18 | |
| S&P 500 Index | +0.2% | 4,117.63 | |
| Dow Industrials | +0.28% | 33,779.19 |
Analyst Color:
The March CPI report showed a few signs of disinflationary forces, but not widespread deflation in the goods categories, according to Michael Gapen, U.S. economist at Bank of America Securities.
BofA said March CPI reading puts the Fed on pace to raise interest rates by 25 basis points at its May meeting. Despite the March improvement, the Fed believes that inflation is still far too high.
Gapen expects the Fed to deliver on its dot-plot projection by hiking rates to 5%-5.25% as long as banking sector stress stays mild.
Wednesday's Trading In Major US Equity ETFs:
In midday trading Wednesday, the SPDR S&P 500 ETF Trust SPY edged 0.2% higher to $410.53, the SPDR Dow Jones Industrial Average ETF DIA rose 0.3% to $337.93 and the Invesco QQQ Trust QQQ held steady at $315.95 according to Benzinga Pro data.
Among U.S. equity sectors, the Consumer Discretionary Select Sector SPDR Fund XLY was the underperformer, down 0.4%, followed by the Metals & Mining Select Sector SPDR Fund XME, down also 0.4%. The Real Estate Select Sector SPDR Fund XLRE outperformed, up 0.6%, as well as the Industrials Select Sector SPDR Fund XLI.
Latest Economic Data:
The Mortgage Bankers Association reported that mortgage applications in the U.S. rose 5.3% in the week ended April 7, rising from a 4.1% drop in the previous week.
The Bureau of Labor Statistics announced the consumer price index dropped from 6% year-on-year in February 2023 to 5% in March 2023. Core CPI was 5.6% year-on-year, higher than February's print.
The Energy Information Administration reported that crude oil stockpiles in the United States grew by 0.6 million barrels in the week ending April 7.
The Federal Reserve is scheduled to release the minutes of its March 21-22 rate-setting meeting at 2 p.m. EDT.
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Stocks In Focus:
- American Airlines Group, Inc. AAL plummted more than 10% after the air carrier raised its profit outlook, but not by enough to match Wall Street expectations.
- National Instruments Corp. NATI rose close to 10% after Reuters said Emerson Electric Co. EMR is close to buying the former for about $8 billion.
- Apogee Enterprises, Inc. APOG reported lower-than-expected earnings and revenues for the quarter.
- Infosys Ltd. INFY, Washington Federal, Inc. WAFD and Bed Bath & Beyond, Inc. BBBY are among the notable companies reporting quarterly results ahead of the market open.
Top Analyst Calls
- Goldman Sachs Group, Inc. GS: UBS upgrades from Neutral to Buy
- Shopify, Inc. SHOP: JMP Securities upgrades from Market Perform to Market Outperform with $65 price target
- MongoDB, Inc. MDB: Morgan Stanley upgrades from Equal-Weight to Overweight and ups price target from $230 to $270
- Las Vegas Sands Corp. LVS: Roth MKM initiated with Buy rating and $74 price target.
Commodities, Bonds, Forex And Other Global Equity Markets:
Crude oil rallied, up 2%, with a barrel of WTI-grade crude trading at $83.11. The United States Oil Fund ETF USO was 2% higher to $72.44 per share.
Treasury yields were mostly flat on the day, with the 10-year yield stable at 3.44% and the two-year yield at 4%. The iShares 20+ Year Treasury Bond ETF TLT was 0.5% lower on the day.
The dollar weakened, with the U.S. dollar index falling 0.6%. The EUR/USD pair rose 0.8% to 1.0999.
All European equity indices closed the session in the green. The iShares MSCI Eurozone ETF EZU was 0.3% higher.
Gold rose 0.3% to $2,008/oz. The SPDR Gold Trust GLD was 0.2% higher to $186.68. Silver rallied 0.8% to $25.28, with the iShares Silver Trust SLV trading 0.9% higher to $23.24 per share. Bitcoin fell 0.8% to $30,003.
Staff writer Piero Cingari updated this report midday Wednesday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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