Wall Street: Despite good inflation data, S&P 500 and Nasdaq fall by 1.8%

The main stock market indices of Wall Street They operated with a majority of casualties this Thursdayas investors turned to small-cap stocks following lower-than-expected inflation data, which reinforced hopes of an easing of monetary policy in September.

The S&P 500 index lost 0.8% to 5,590 points, Meanwhile he The Nasdaq fell 1.6% to 18,438 points. Meanwhile, the Industrial Average The Dow Jones gained 0.13% to 39,771 points.

A report from the work Department showed that the U.S. consumer prices unexpectedly fell and the annual increase was the smallest in a year, reinforcing views that the disinflationary trend has returned.

The data is a good sign for Federal Reserve policymakers, who are looking for evidence that the Inflation is back on track towards its 2% target, which led the operators to increase their bets on a rate cut in September.

The Russell 2000 index gained 2.1% to its highest level in more than a monthdue to expectations that the rate cuts will improve conditions for small and mid-cap companies.

“We recognize that we are on the cusp of a much stronger quarter of earnings, and if we have strong GDP in a few weeks, the Fed is likely to signal in July that it will stay the course. A 3% CPI reading is still well above its target,” said Scott Helfstein of Global X.

Large cap stocks like Apple, Microsoft, Alphabet and Nvidia were down between 2% and 3.9%, after briefly rising before the data. The The S&P 500 real estate sector rose 2.4%, leading sector gains, while the Communication services were the most affected.

The S&P 500 and Nasdaq hit new record highs at the opening of trading.

“There is an understanding that we are about to have a much stronger earnings quarter, and if we have a strong GDP number in a few weeks, the Federal Reserve will probably will give signals in July that they will stay the course“A 3% CPI figure is still well above their target,” said Scott Helfstein, chief investment strategist at Global X.

What was the inflation data in the US and what is expected with the rates?

US inflation fell to 3% in Junean encouraging sign for the Federal Reserve, which will now have to debate how quickly to reduce interest rates from their highest level in 23 years.

The consumer price index, a broad measure of the costs of goods and services across the U.S. economy, fell 0.1 percent from May to June, putting the annual rate at 3 percent, roughly its lowest level in more than three years, the Labor Department reported Thursday.

As analyzed by Balanz Capital, the following was highlighted: housing inflationwhich stood at 0.2% m/m, breaking with 4 consecutive months at 0.4%. S&P 500 futures advanced 0.3% after the data was known, reversing the 0.15% drop they showed at the beginning of the day and accentuating yesterday’s 1% advance of the index, which crossed 5,600 points.

“Treasury rates are generally depressed, although more noticeably in the 10-year bond, whose yield shows a fall of 10 basis points (bps) to 4.18%, accentuating yesterday’s average fall of 2 bps,” adds the broker from the city.

The year-on-year increase in eThe consumer price index was lower than economists expectedwhich was expected to rise 3.1%, according to forecasts compiled by Bloomberg, and followed a 3.3% increase in May.

The data, released by the Bureau of Labor Statistics on Thursday, come as the Fed seeks more evidence that inflationary pressures are easing in the world’s largest economy. Despite market expectations earlier in the year of as many as seven interest rate cuts in 2024, The Fed has kept its benchmark rate in a range of 5.25 to 5.5 percent, the highest since 2001.

But Jerome Powell said the job market was showing signs of cooling and officials were concerned about strangling the economy by keeping rates too high for too long. He added that decisions would be made “meeting by meeting.”