U.S. Stocks rose sharply on Wednesday after a key inflation reading showed a better-than-expected slowdown for rising prices.
Futures for the Dow Jones Industrial Average jumped 411 points, or 1.3%. S&P 500 futures gained 1.7%, while Nasdaq 100 futures jumped 2.4%.
The headline consumer price index for July rose 8.5% year over year, and was flat compared to June. Economists surveyed by Dow Jones were expecting increases of 8.7% and 0.2%, respectively.
Core inflation, which strips out volatile food and energy prices, also saw a smaller-than-expected increase.
The Federal Reserve will weigh the report, along with other key economic data, ahead of its September meeting where it is slated to hike interest rates again.
“The deceleration in the Consumer Price Index for July is likely a big relief for the Federal Reserve, especially since the Fed insisted that inflation was transitory, which was incorrect. ... If we continue to see declining inflation prints, the Federal Reserve may start to slow the pace of monetary tightening,” said Nancy Davis, founder of Quadratic Capital Management.
The moves in futures come after the Nasdaq Composite fell for a third straight day on Tuesday. The Nasdaq Composite led the declines, falling 1.2% afterMicron, Novavax and Upstart warned that future earnings and revenue may come in lower than previously thought. The S&P 500 fell 0.42%, and the Dow Jones Industrial Average shed 0.18%.
Earnings season also continues, with Disney’s quarterly results due after the bell Wednesday.
Treasury yields tumble after CPI report
Treasury yields dropped on Wednesday as a highly anticipated inflation figure came in flat compared with the previous month.
The yield on the benchmark10-year Treasury note tumbled 9 basis points to 2.67%, hitting the lowest level in a week. The yield on the 30-year Treasury bond fell 6 basis points to 2.96%.
The inflation report suggested to some that price pressures might have peaked, which could spark speculations that the Federal Reserve could conduct a smaller interest-rate hike next month.
“Overall, incremental confirmation that the Fed’s efforts to combat consumer price increases have been successful,” Ian Lyngen, BMO’s head of U.S. rates, said in a note. “The combination of NFP and CPI for July leave the 75 bp vs. 50 bp Sept hike debate alive and well.”
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