The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all closed at record highs on Wednesday after new data revealed that inflation had cooled in April. The latest Consumer Price Index showed prices were up 3.4% for the 12 months ending in April, easing from 3.5% the previous month.
The S&P 500 closed at 5,308.15, the Nasdaq at 16,742.39, and the Dow at 39,908, with investors optimistic that cooler inflation could prompt the Federal Reserve to cut interest rates. Economists were largely expecting the inflation report, with the core CPI, which excludes energy and food prices, slowing to 3.6%.
Grocery prices fell for the first time in a year, while other staple spending areas also showed easing inflation. However, new and used car prices continued to decrease, while issues with motor vehicle insurance and repair and maintenance costs remained. Apparel prices saw an increase in April, while housing costs eased to their lowest annual rate since May 2022.
The Federal Reserve is looking for meaningful progress on inflation before considering trimming interest rates, as inflation has considerably cooled since spiking to 9.1% annually in June 2022. A separate report showed US retail sales remained flat in April, indicating a potential slowdown in consumer spending and moderating inflation.
Overall, the stock market reached new heights as inflation cooled, providing relief to investors and fueling speculation about potential interest rate cuts by the Federal Reserve. With signs of easing inflation across various sectors, the economy is showing signs of stabilization after a period of volatility.
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