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Stock market today: S&P 500 hits new record high as investors shrug off sticky inflation data
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US stocks notched gains across the board on Tuesday after key inflation data came in hotter than expected to help set expectations for the timing of a Federal Reserve interest-rate cut.
The S&P 500 (^GSPC) rose about 1.2% to close at a new record high, while the tech-heavy Nasdaq Composite (^IXIC) climbed roughly 1.5% after two days of losses, led by chip giant Nvidia's 7% gain (NVDA). The Dow Jones Industrial Average (^DJI) ticked up about 0.6%.
Treasury yields also gained with the 10-year yield (^TNX) rising 5 basis points to trade around 4.15%. Gold prices (GC=F) fell more than 1% to trade near $2,162.
Investors are digesting the Consumer Price Index release, one of the most important data inputs for the Fed in deciding its next policy move. Headline inflation met expectations with a monthly gain of 0.4% in February, following a 0.3% rise the month before. But "core" CPI — which strips out food and energy prices — came in at a 0.4% rise on the month and 3.1% gain on the year, both higher than estimates.
The CPI print is seen as influential, given Fed policymakers have said they want to be sure inflation is easing before beginning to bring rates down from their historically high level. Before the CPI release, S&P 500 traders were hedging moves of 0.9% in either direction for stocks.
Meanwhile, bitcoin (BTC-USD) continued its record-setting rally with a rise above $72,000 earlier in the session. Surging inflows into crypto assets have helped the leading token to notch an almost 70% gain this year so far, prompting bulls to predict bitcoin could reach as high as $350,000 this year.
On the corporate front, Oracle (ORCL) shares jumped about 12% on signs the database giant is making progress in cloud computing amid a tie-up with AI chip giant Nvidia.
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Technology sector leads market as Energy, Real Estate lag
Tech stocks pushed markets higher on Tuesday as investors shrugged off a sticky inflation print for the month of February.
On a sector basis, Technology (XLK), Consumer Discretionary (XLY), and Consumer Staples (XLP) led the day while Utilities (XLU), Real Estate (XLRE), Materials (XLB), and Energy (XLE) were the biggest laggards.
To note, those are some of the most interest rate-sensitive areas of the market.
(Source: Yahoo Finance) Investors still pricing in June rate cut
February's sticky inflation report represented the last inflation print before the Fed's next policy decision on March 20. Investors are hopeful the central bank will cut interest rates this year.
After the data's release, markets were pricing in a nearly 100% chance the Federal Reserve keeps rates unchanged next week, according to data from the CME Group.
The market still largely expects the central bank to begin cutting rates at its June meeting, pricing in roughly 60% chance of a cut. Those expectations remain unchanged despite the hotter-than-expected data.
Fed Chair Jerome Powell. (Bonnie Cash/REUTERS) (Reuters / Reuters) Inflation has remained above the Federal Reserve's 2% target on an annual basis. But the Fed's preferred inflation gauge, the core PCE price index, has come in below that rate on a six-month annualized basis, boosting hopes the central bank could begin to cut interest rates.
But more recent data has put a dent in that optimism, with the six-month annualized PCE price increase for January settling at 2.5%.
To note, the Fed has consistently preached that the path down to 2% will be "bumpy."
As Yahoo Finance's Jennifer Schonberger pointed out, markets began the year betting on six cuts starting in March, only to revert to three cuts starting in June following cautious commentary from Fed Chair Jerome Powell and a slew of other Fed officials along with higher-than-expected readings on inflation.
Last week, Powell said that while he expects interest rate cuts "at some point this year," the FOMC committee still wants to see "a little bit more data" before committing to cuts.
"The February consumer price index will not instill more confidence among the Federal Reserve members that inflation is on a sustainable path toward their 2% objective," Ryan Sweet, chief US economist at Oxford Economics, wrote in reaction to the report.
"A pessimistic scenario is one in which rates are higher for longer, where inflation reaccelerates and long-term inflation expectations increase, forcing the Fed to resume raising interest rates," he continued. "This is possible but unlikely, particularly as there is disinflation in the pipeline from lower market rents and a deceleration in nominal wage growth."
