US open: Stocks in the green despite hottest CPI reading in over 40 years

Wall Street stocks were firmly in the green early on Tuesday as market participants digested a key inflation report from the Labor Department.

As of 1530 BST, the Dow Jones Industrial Average was up 0.49% at 34,475.64, while the S&P was 0.88% firmer at 4,451.36 and the Nasdaq Composite came out the gate 1.56% stronger at 13,620.59.

The Dow opened 167.56 points higher on Tuesday, taking a bite out of losses recorded in the previous session as Treasury yields continued to move higher ahead of the Q1 earnings season.

Tuesday's primary focus was last month's consumer price index, which revealed US inflation hit a fresh 40-year high in March as energy prices surged due to the war in Ukraine.

According to the Labor Department, consumer price inflation jumped to 8.5% - its fastest annual rate of growth since 1981 - from 7.9% in February. Analysts had been expecting a figure of 8.4%. On the month, prices were up 1.2% in March, versus a 0.8% increase in February and marking the biggest jump since 2005. The gasoline index surged 18.3%, accounting for more than half the total monthly increase. Food prices rose 1%, while shelter prices were 0.5% higher.

Stripping out volatile food and energy costs, core inflation was 6.5% on an annualised basis, up 0.1 percentage point on the month but below consensus estimates of 6.6%. On a monthly basis, core CPI was 0.3%, down from 0.5% in February and below consensus expectations of no change. It also marked the lowest level since September.

Elsewhere on the macro front, the National Federation of Independent Business' small business optimism index declined for a third straight month in March, falling from 95.7 in February to 93.2 - the lowest since April 2020. The percentage of owners expecting better business conditions over the next six months decreased 49%, the lowest level on record, with inflation seen as the most important problem by 31% of business owners, the biggest share since the first quarter of 1981.

"With inflation, an ongoing staffing shortage, and supply-chain disruptions, small-business owners remain pessimistic about their future business conditions. Their expectations for sales growth and business conditions later this year are in the tank" said NFIB chief economist Bill Dunkelberg.

Still to come, the Federal Government's budget statement for last month will follow at 1900 BST.

Also drawing investor attention was news that Treasury yields had jumped to multi-year highs, with the yield on the benchmark 10-year Treasury note briefly trading at 2.801% early on Tuesday - a level not recorded in over than three years - before dropping back to 2.718% shortly after the open.

No major corporate earnings were slated for release on Tuesday but JPMorgan Chase and Delta were both set to report results on Wednesday, while Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo will report before markets open on Thursday.