"CPI Report Boosts Sentiment, Leading Nasdaq to Higher Close on Wall Street"
U.S. stocks rise as inflation eases, tech sector leads gains.
U.S. stocks closed higher on Wednesday, with the Nasdaq leading the gains after a report showed a further decrease in inflation, resulting in the smallest annual increase in consumer prices in over two years. This data supports expectations that the Federal Reserve may keep interest rates steady after an anticipated 25 basis point hike in July. The technology sector, which is sensitive to higher interest rates, contributed significantly to the S&P 500's overall performance, rising by 1.3%.
The Consumer Price Index (CPI) increased by 3.0% in the 12 months leading up to June, marking the smallest year-on-year rise since March 2021. This followed a 4.0% increase in May. While the indexes retreated from their early highs in the afternoon, "bulls remain firmly in charge," according to Michael James, managing director of equity trading at Wedbush Securities. The positive CPI data is encouraging for investors who have been waiting for a market pullback.
The Dow Jones Industrial Average rose by 86.01 points, or 0.25%, to reach 34,347.43. The S&P 500 gained 32.9 points, or 0.74%, closing at 4,472.16, and the Nasdaq Composite added 158.26 points, or 1.15%, reaching 13,918.96.
Investors are carefully considering how much longer the Federal Reserve will need to raise rates in order to control inflation. The Cboe Volatility Index, which measures market volatility, decreased. The Labor Department's report also revealed the smallest monthly increase in underlying consumer prices since August 2021.
Quincy Krosby, chief global strategist at LPL Financial, believes that the market senses the Federal Reserve is nearing its final interest rate hike. The S&P 500 banks index increased by 0.6%, and the second-quarter earnings season is set to begin with reports from major U.S. banks, including JPMorgan Chase, on Friday.
In other news, U.S. chipmaker Broadcom received antitrust approval from the European Union for its proposed $61 billion acquisition of cloud computing firm VMware. Broadcom offered remedies to address concerns from rival Marvell Technology. Shares of VMware rose by 2.8%, while Broadcom and Marvell saw increases of 0.9% and 1.2%, respectively.
Nvidia's shares also rose by 3.5% after reports revealed that SoftBank Group Corp's chip designer Arm Ltd is in talks with Nvidia to become an anchor investor. Arm Ltd plans to pursue a New York listing in September. Additionally, Nvidia announced a $50 million investment to accelerate the training of Recursion's artificial intelligence models for drug discovery, resulting in a 78% increase in Recursion shares.
Investors also considered the impact of U.S. Treasury Secretary Janet Yellen's visit to China, which raised hopes in Beijing that tariffs on Chinese imports may be eased.
Overall, trading volume on U.S. exchanges reached 11.20 billion shares, slightly higher than the 11.15 billion average over the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE, with a ratio of 3.23-to-1, and on Nasdaq, the ratio favored advancers at 1.93-to-1. The S&P 500 recorded 66 new 52-week highs and 2 new lows, while the Nasdaq Composite saw 129 new highs and 42 new lows.
Caroline Valetkevitch reported this article, with additional contributions from Johann M Cherian and Bansari Mayur Kamdar in Bengaluru, as well as Shashwat Chauhan. The article was edited by Shinjini Ganguli, Nick Zieminski, and David Gregorio.