The Magnificent Seven, the main technology companies that lead the stock market and the growth of the S&P 500 index in recent years, are flying on Wall Street this Wednesday after a positive inflation data that renewed enthusiasm in the New York market.
Apple (AAPL) climbs 2.1%, Microsoft (MSFT) rises almost 3%, Nvidia (NVDA) climbs 2.4%, Google climbs 2.8%, Meta 3.8%, Amazon 2.5% and Tesla flies an impressive 5%.
As it happens, the market breathed a sigh of relief when consecutive inflation indicators, yesterday’s PPI and this morning’s CPI, came in slightly below expectations. In this regard, John Kerschnerportfolio manager at Janus Henderson, noted that while the headline CPI was 0.4% and 2.9% year-on-year, the core CPI was one tenth of a percentage point below expectations, placing it at 0.2% and 3.2% year-on-year.
“The monthly headline figure was higher than the baseline due to recent increases in energy prices, specifically oil, which has an impact on gas prices,” he added. Kerschner.
The havoc explained that these figures give the Fed the possibility of remaining patient and waiting for more data to be published to take the next step. The bond market has reacted with a significant rally, with rates falling between 10 and 12 basis points across the yield curve, and the 10-year bond staying further away from the psychologically important 5% level.
What’s next for Wall Street
For the analyst, currently, the market is not pricing in a Fed cut in January. However, the probability of a cut in June is now close to 100%. Before today’s figure, the market was only expecting a 25 basis point cut in 2025, but now the market is pricing in more than 1.5 cuts.
“Perhaps most importantly, the CPI figure for today discards INCREASES additional rates that some market participants were beginning to discount prematurely,” he said.
Today’s figures contrast with those from early 2024, when we saw markedly higher inflation figures, particularly in basic services excluding housing (also known as supercore inflation). That measure is now down to 3.6% on a 6-month annualized basis, down from 6% at the beginning of 2024.
Another encouraging sign is that housing inflation or owner’s equivalent rent (OER) stood at just 0.31%, which is equivalent to 4.3% on a six-month annualized basis. months, compared to 5.5% a year ago. This normally rigid inflation figure has been falling considerably and averages around 0.3% per month, compared to 0.5% a year ago. If this downward trend in housing inflation continues, it will be much easier for the Fed to achieve its target of 2% core PCE inflation, he said.
While the market remains cautious about the incoming administration’s policies, especially around tariffs and tax cuts that could help stoke inflation, this morning’s inflation numbers go a long way toward giving the market confidence that Fed policy is on the right track.
Perhaps most importantly, the market is relieved that potentially catastrophic interest rates have been ruled out, for now, and that the bond market will not slow the massive run we have seen in equity markets over the past two years.
Source: Ambito
I am an author and journalist who has worked in the entertainment industry for over a decade. I currently work as a news editor at a major news website, and my focus is on covering the latest trends in entertainment. I also write occasional pieces for other outlets, and have authored two books about the entertainment industry.
