The S&P 500 and Nasdaq indices rose on Wednesdayhelped by a slightly lower-than-expected rise in April inflation and the latest AI launch from Alphabet, Google.
According to preliminary data, the S&P 500 gained 17.93 points, or 0.4%, to 4,137.10, while the Nasdaq Composite rose 124.68 points, or 1%, to 12,304.23. The Dow Jones Industrial Average fell 33.45 points, or 0.1%, to 33,528.36.
The Labor Department’s Consumer Price Index (CPI) rose 4.9% in April from a year earlier, versus expectations for a 5% rise, raising hopes that the Federal Reserve’s rate hike cycle is nearing its end. The month-on-month CPI improved to 0.4%, after advancing 0.1% in March.
“The markets reacted positively because they saw the inflation data as slightly positive”said Michael Harris, president of hedge fund Quest Partners LLC. “The Fed is on pause now. They did their last rate hike and will wait and see for the next few months.”
The inflation data sent the Nasdaq Composite up as much as 1.2% to its best intraday level in more than eight months. The Nasdaq was supported by a rise in Alphabet as the company implemented more artificial intelligence for its main search product in response to competition from Microsoft Corp.
Large-cap technology stocks, including Apple Inc and Microsoft, also rose. The interest rate sensitive S&P 500 technology sector index and communication services rose.
Growth companies are more dependent on borrowed money, so they benefit from lower rates.
Fed funds futures traders are pricing in a pause in rate hikes at the central bank’s June meeting, and a less than 5% chance of another 25 basis point hike.
Indices were volatile during the session as investors scrutinized the positive inflation reading alongside debt ceiling concerns.
Talks about raising the US federal government’s maximum debt limit to $31.4 trillion entered a new phase on Wednesday as some areas of possible compromise emerged after Tuesday’s White House meeting.
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