Wall St increases as signs of sluggish inflation reduce rate hike chances

The major Wall Street indexes increased by more than 1% on Wednesday as traders reduced their expectations for a third consecutive 75-basis-point interest rate hike in September as data revealed a slower-than-expected rise in inflation in July.

Due to falling fuel prices, consumer prices in the United States did not increase in July compared to June, marking the smallest monthly inflation in more than two years.

As opposed to 67.5% before the data, the market now expects a 75-basis-point increase in fund rates at the US Federal Reserve’s upcoming meeting in September.

Consumer discretionary (.SPLRCD), information technology (.SPLRCT), and communication services (.SPLRCL) all saw gains of between 1.7% and 2.6% in early trade, leading the way for the 11 major S&P 500 sectors.

The global sales trader at Saxo Markets said, “The sign of slowing in the rate of inflation offers hope the Fed’s rate increases won’t need to go as far as previously thought.”

At 9:46 a.m. ET, the Nasdaq Composite (.IXIC) was up 282.51 points, or 2.26%, at 12,776.44, the S&P 500 (.SPX) was up 73.23 points, or 1.78%, and the Dow Jones Industrial Average (.DJI) was up 513.98 points, or 1.57%, at 33,288.39.

The benchmark S&P 500 is up over 15% from its mid-June low after a difficult start to the year, mainly due to anticipation that the Fed will be less aggressive than expected in its efforts to ensure a soft landing for the economy.

As Treasury yields fell dramatically across the board, high-growth and mega-cap technology firms, whose valuations are susceptible to rising bond yields, gained. Each of Amazon.com Inc (AMZN.O), Alphabet Inc (GOOGL.O), and Apple Inc (AAPL.O) had a gain of over 2%.

According to Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors, ‘Rising real yields, due to the Fed’s commitment to fighting inflation, have been an enormous problem for valuations in 2022, so any dovishness is seen as positive by the stock market, particularly for the highest valued companies.’

Tesla Inc. (TSLA.O), a manufacturer of electric vehicles, increased 3.4% after Chief Executive Elon Musk sold $6.9 billion worth of company shares.

Musk suggested that the money might be used to finance a future Twitter (TWTR.N) purchase if he loses a court battle. The Twitter stock increased 3.3%. Read more

After the Facebook parent company announced on Tuesday that it had raised $10 billion in its first-ever bond issue, Meta Platforms Inc (META.O) saw a 5.7% increase. Read more

Banks that are affected by the economy (.SPXBK) also increased, with Goldman Sachs Group Inc (GS.N) and JPMorgan Chase & Co (JPM.N) both rising by 3%.

On the NYSE and the Nasdaq, advancing issues exceeded declining ones by an 8.16-to-1 ratio and a 4.14-to-1 ratio, respectively.

The Nasdaq posted 38 new highs and 24 new lows, compared to the S&P index’s five new 52-week highs and 29 new lows.