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Stocks pop after CBI, Fed jumps

June 12, 2024
Arzu

U.S. stocks rose on Wednesday after a new reading on inflation showed that consumer prices rose less than expected in May. The latest snapshot of inflation, the highly-anticipated Federal Reserve meeting later in the afternoon, will provide the latest signal on the path of interest rates.

The S&P 500 (^GSPC) rose more than 0.8% for its 27th record close of the year. The tech-heavy Nasdaq Composite ( ^IXIC ) rose nearly 0.9%, completing a record high from the previous day. The Dow Jones Industrial Average (^DJI) also rose about 0.9%.

The Consumer Price Index (CPI) was flat from the previous month and rose 3.3% from a year earlier in May – a decline from a 0.3% month-on-month increase in April and a 3.4% annual gain in prices. Both measures beat economists’ expectations. On a “core” basis, which strips out the more volatile costs of food and gas, prices in May were 0.2% from the previous month and 3.4% from last year – cooler than April’s data. Both measures came in better than economic estimates.

This changed market expectations for central bank rate cuts this year. Following the data release, markets priced in a 69% chance the Federal Reserve will begin cutting rates at its September meeting. According to data from the CME FedWatch tool. That’s up from a 53% chance the previous day.

Subsequently, interest rate sensitive parts of the market rose. Real estate ( XLRE ) led eleven sectors, rising more than 2%.

read more: How does the labor market affect inflation?

But that could all change later this afternoon. The Fed decision is all but certain – the Fed is expected to keep rates at their current 23-year high. Investors will be paying close attention to the Fed’s release of updated economic forecasts on its “dot plot” — specifically, how many rate cuts it plans for the rest of the year.

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Last we heard, in March, it was three. Thanks in part to the aforementioned stickiness of inflation, policymakers are almost certain to start this year. Those forecasts, Fed Chairman Jerome Powell said at his press conference, could be the last market-moving events of an unusually busy day.

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  • Stocks rise at the open as yields decline

    U.S. stocks rose on Wednesday after a new reading on inflation showed that consumer prices rose less than expected in May. The latest snapshot of inflation, the highly-anticipated Federal Reserve meeting later in the afternoon, will provide the latest signal on the path of interest rates.

    The S&P 500 (^GSPC) rose more than 0.8% for its 27th record close of the year. The tech-heavy Nasdaq Composite ( ^IXIC ) rose nearly 0.9%, completing a record high from the previous day. The Dow Jones Industrial Average (^DJI) also rose about 0.9%.

    The 10-year Treasury yield ( ^TNX ) fell about 10 basis points to 4.3%.

  • This is the risk in the markets after the CBI print

    Stock futures rose after a cooler-than-expected reading on consumer prices for May.

    S&P 500 futures (ES=F) rose 0.7% for the 27th record close of the year. Futures for the tech-heavy Nasdaq 100 (NQ=F) rose nearly 0.9%. Dow Jones Industrial Average futures (YM=F) rose 0.6%.

    Notably, interest rate sensitive parts of the market saw the biggest gains. Futures linked to the Russell 2000 (RT=F) rose about 2.3%.

    It came as investors quickly revised their expectations for rate cuts this year. Following the data release, markets priced in a 69% chance the Federal Reserve will begin cutting rates at its September meeting. According to data from the CME FedWatch tool. That’s up from a 53% chance the previous day.

  • Inflationary pressures lower than expected

    U.S. consumer price increases cooled in May, according to Latest data From the Bureau of Labor Statistics released Wednesday morning.

    The Consumer Price Index (CPI) was flat from the previous month and came in at 3.3% from a year earlier in May, down from 3.4% in April and below the 3.4% expected by economists.

    May’s monthly increase came in short of economic forecasts for a 0.1% rise.

    On a “core” basis, which strips out the more volatile costs of food and gas, prices in May were 0.2% from the previous month and 3.4% from last year – cooler than April’s data. Both measures were below economists’ expectations.

  • Nvidia is like Sun…

    A tip to Apollo’s Chief Economist Torsten Slok for this vibrational check on the S&P 500.

    Clearly, Nvidia ( NVDA ) is the sun around which the other 499 companies circle.

    Note: Apollo is the parent company of Yahoo Finance.

    This is Nvidia Market.This is Nvidia Market.

    This is Nvidia Market. (Apollo)

  • JPMorgan Musk Weighs in on Pay Package Vote

    Tesla ( TSLA ) shareholder vote on Elon Musk’s $56 billion pay package is coming down to the wire.

    Ahead of Thursday’s vote, Tesla dropped this Mail X, owned by Musk, chronicles the achievements of its CEO (it’s weird to see from a corporate X account, but hey, it’s Musk we’re talking about here).

    A new Yahoo Finance poll now finds that 96% of people polled disapprove of Musk’s pay package.

    Meanwhile, JP Morgan analyst Ryan Brinkman weighed in with a note this morning:

    “While ISS and Class Lewis and many other key institutional and retail shareholders have voiced opposition to the 2024 approval of Mr. Musk’s 2018 compensation plan, we suspect it will pass at a lower approval rate than in 2018. By a narrower margin than popularly imagined, strong retail shareholder support and corporate We based this expectation on our conversations with investors who, at the time, did not support the Solar City acquisition, but were concerned that there would still be a negative stock price reaction if the transaction was voted down.

    Brinkman reiterated an underweight rating (equal sell) on Tesla shares and a $115 price target, which is considered a roughly 32% downside from current price levels.

    Read more about Yahoo Finance senior legal reporter Alexis Keenan’s musket vote and key CEO pay package votes here.

  • Make sure you’re still moving after the big Apple deal

    Affirm ( AFRM ) remains one of the hotter tickers on the Yahoo Finance platform after news of its integration with Apple ( AAPL ) Pay dropped on Tuesday. Shares rose 1.5% yesterday after an 11% pop after the market.

    I caught up with Affirm’s founder and CEO Max Levchin last night for a new taping of my ‘Opening Pit’ podcast. The full episode (which goes into Levchin’s views on AI and the political resonance in Silicon Valley) will be published Friday morning on Yahoo Finance and Major Podcast Sites.

    But I’ve put a clip of Levchin’s comments on the tie-up below for your viewing pleasure.

    Levchin stopped short of sharing how the deal will affect Affirm financially (the 1.4 billion iPhones worldwide could be huge), but indicated that it will be a strong top- and bottom-line contributor over time.

    He acknowledged that the deal now “verifies” the buy-then-pay space — which has been under siege from regulators and other parties almost from the start.

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