Stocks rebound on hopes inflation peaks, Nasdaq adds 1%

Stocks rose on Tuesday, boosted by data showing so-called core inflation rose slightly less than expected last month.

The Dow Jones Industrial Average gained 283 points, or 0.8%. The S&P 500 jumped 1%. The Nasdaq Composite climbed 1.5%, after falling more than 2% in the previous session, as tech stocks that have been hit hard this year by higher rate fears rebounded.

Consumer prices for March rose 1.2% month-over-month and 8.5% year-over-year, the Labor Department said Tuesday. But traders were focused on the core reading, which excludes food and energy prices. Core CPI in March rose 0.3%, below Dow Jones economists’ consensus estimate of 0.5%. Base prices on an annual basis increased by 6.5%.

“It’s a hot number, but the market reaction so far suggests it’s priced in, especially with the basic month-on-month reading coming in below expectations,” Mike Loewengart wrote. , managing director of investment strategy at Morgan Stanley’s E-Trade. “The big debate is whether high readings like these are the new norm, or if we’re starting to see a light at the end of the inflationary tunnel.”

The 10-year Treasury yield fell from a three-year high after the report as traders bet the base reading could mean inflation is showing signs of peaking.

That helped tech stocks recoup some of their losses this month. The tech-heavy Nasdaq fell more than 5% this month as investors sold growth names amid rising rates.

Microsoft climbed 1.6%. Nvidia chip stocks jumped 3.7%, Qualcomm 2.2% and Broadcom 2.4%. Tesla rebounded 3.9%.

The recent surge in inflation in the United States has helped raise expectations of a tightening of monetary policy by the Federal Reserve. The Fed raised rates at its March meeting, and it is expected to rise further throughout the year.

“I think the 50 basis point increase is scheduled for the next meeting because they have the clearance for that. But the bond market has gotten to the point where, does it matter what they’re increasing it to And I would say ‘no,’” said Kim Forrest, founder of Bokeh Capital.

“The bond complex has already moved forward to figure out what it thinks the moves are going to be. And I think that’s really good for the Fed and for investors. You know, we don’t like suddenness,” said she continued.

The 10-year Treasury yield fell more than 6 basis points to 2.717% following the CPI report after earlier hitting 2.82%, a level not seen in more than three years. (1 basis point equals 0.01%).

Shares rose even as oil prices soared, recouping losses from the previous session amid fears that China’s Covid lockdowns could hurt demand. International benchmark Brent crude jumped 7% to $105.47 a barrel. Meanwhile, West Texas Intermediate crude futures gained 7.4% to $101.23 a barrel.

Energy stocks followed oil prices higher. Devon Energy jumped 4.1%, Marathon Oil 4%, Chevron 2.4%.

Investors are also awaiting the start of the earnings season which is expected to start on Wednesday with JPMorgan and Delta Air Lines, followed by several major banks on Thursday.

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Stocks rebound on hopes inflation peaks, Nasdaq adds 1%

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