US close: Stocks rise on cooler-than-expected inflation reading

dl wall street new york city wall st nyc new york stock exchange nyse nasdaq us usa united states of america trading finance unsplash — Sharecast / Roberto Junior via Unsplash

Stock markets on Wall Street wrapped up trading on a strong note on Tuesday, bolstered by cooler-than-expected consumer inflation data that fuelled expectations of the Federal Reserve holding off on interest rate hikes at its imminent meeting.

At the close, the Dow Jones Industrial Average was up 0.43% at 34,212.12, while the broader S&P 500 climbed 0.69% to settle at 4,369.01 points.

The tech-heavy Nasdaq Composite took the lead, appreciating 0.83% to finish the session at 13,573.32 points.

In currency markets, the dollar was last up 0.01% on both sterling and the euro to trade at 79.3p and 92.66 euro cents, respectively.

The greenback did, however, lose some ground to the yen, sliding 0.06% to change hands at JPY 140.14.

“As soon as US CPI beat expectations, the percentage of traders expecting the Fed to ‘skip’ a rate hike at Wednesday's FOMC meeting jumped from around 75% to over 95%,” said IG senior market analyst Axel Rudolph.

“The percentage of those believing in a 25-basis point rate hike at the July meeting has risen to nearly 65%.”

Consumer inflation comes in cooler than expected

On the economic front, the Department of Labor reported that the country's consumer price index showed a slower-than-anticipated rise in living costs in May, easing inflationary concerns.

The data showed a 0.1% month-on-month increase in the CPI for the month, driving the annual rate of increase down from 4.9% to 4.0%, slightly below the consensus of 4.1%.

When looking at core CPI, which eliminates the impact of frequently fluctuating sectors such as food and energy, the rise was reported at 0.4% over the month, aligning with the predicted consensus.

In the food sector, prices inched up by 0.2% after maintaining a flat trajectory in the two preceding months.

Conversely, energy costs followed a downward trend, falling by a substantial 3.6%.

Notable contributors to the core CPI included used car and truck prices, which continued their upward trend for the second month in a row with a 0.6% increase.

The cost of shelter also saw an accelerated rise, posting a 0.6% monthly increase, following a 0.4% gain in April.

Prices for commodities excluding food and energy were also on an upward swing, reporting a 0.6% rise, matching the rise in medical care commodities.

However, the cost of medical care services bucked the trend with a slight 0.1% dip.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said there was a "good chance" that monthly core CPI gains would soon start printing at 0.2%.

“Given that rents and used vehicles accounted for four-fifth of the increase in the May core, this signals a good chance of 0.2% core prints very soon,” he noted.

Oracle in the green while Home Depot slips

In equities, tech giant Oracle Corporation saw its stock rise 0.21%, buoyed by encouraging fourth-quarter results that surpassed expectations, released late on Monday.

On the merger and acquisition front, agricultural firms Bunge and Viterra announced an $18bn merger agreement, leading to a 2.54% increase in Bunge's stock.

“Together, the highly complementary organizations will benefit from more diversified capabilities, greater operational flexibility across oilseed and grain supply chains and processing, greater resources, and combined employee talent to innovate and deliver for customers in every environment, creating value for all stakeholders,” the firms said.

On the downside, hardware retailer Home Depot saw a 0.26% dip in its shares after it reaffirmed the full-year earnings guidance it provided last month.

Reporting by Josh White for Sharecast.com.

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