U.S. stocks higher ahead of inflation data

by Jonathan Adams

The blue-chip Dow now stands less than 1% away from breaching the 40,000 mark for the first time

U.S. stocks were higher on Wednesday, with the Dow leading gains and the S&P 500 setting a closing record, paced drugmaker Merck, while investors looked towards the next inflation data and Fed commentary for signals on the rate path.

Merck & Co gained 4.96% as the best performer on the Dow after the U.S. FDA approved its therapy for adults suffering from a rare lung condition.

The blue-chip Dow now stands less than 1% away from breaching the 40,000 mark for the first time.

Gains on the Nasdaq were held in check, however, by 2.5% drop in AI giant Nvidia, which lost ground for a second consecutive session. Shares were still up more than 80% on the year, however.

Recent data that showed hotter than expected inflation in the form of CPI and PPI failed to markedly disrupt market expectations for a rate cut of at least 25 bps from the Fed in June.

The Fed kept its projections for three rate cuts this year intact at its policy meeting last week, which central bank officials have largely stood by this week in comments.

The PCE price index is due on Good Friday, when the U.S. stock market will be shut.

The Fed can and should take its time, largely because the economy is affording them that flexibility with the strength that we are seeing, and that premature rate cuts only probably set us up for a more adverse outcome, according to Craig Fehr, head of investment strategy at Edward Jones in St. Louis.

The real challenge for Fed officials has been massaging and guiding market expectations when they swing too far in one direction or another, he said.

Later in the day, Fed Board Governor Christopher Waller is expected to speak at the Economic Club of New York.

The Dow Jones Industrial Average gained 477.75 points, or 1.22%, to 39,760.08, the S&P 500 added 44.91 points, or 0.86%, to 5,248.49 and the Nasdaq Composite advanced 83.82 points, or 0.51%, to 16,399.52.

The gains marked the biggest daily percentage advance for the Dow since December 13.

All three major U.S. stock indexes were poised for quarterly gains, with the S&P on track for its biggest first quarter percentage gain since 2019.

Traders see a 70.4% probability the Federal Reserve will begin its easing cycle in June, per the CME FedWatch Tool.

Each of the 11 major S&P sectors were higher, with rate sensitive utilities and real estate were the best performers, jumping 2.75% and 2.42%, respectively, getting a lift as bond yields eased.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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