Monday, April 22, 2024

Wall Street bounces after new data shows inflation continues to cool

by BIZ Magazine

Wall Street bounced higher Tuesday after better than expected news on inflation.

Futures for the Dow Jones industrials rose 1.1% and the S&P 500 edged 1.4% higher.

President Joe Biden will meet with Chinese leader Xi Jinping this week on the sidelines of a Pacific Rim summit in California. It will be the first face-to-face encounter in a year between the leaders of the world’s two biggest economies.

In corporate news, Home Depot shares got a small bounce after the home improvement chain beat Wall Street forecasts but narrowed its full-year outlook. Its shares rose less than 1% before the bell. The Atlanta retailer said consumers are reticent to purchase big-ticket appliances, often bought on credit, which has grown very expensive as a result of the fight by the U.S. Federal Reserve to rein in inflation.

Target, Macy’s and bellwether Walmart report later this week.

Inflation in the United States slowed last month in a sign that the Federal Reserve’s interest rate hikes are continuing to cool the consumer price spikes that have bedeviled consumers for the past two years.

A report Tuesday from the Labor Department showed that lower gas prices helped cool overall inflation, which was unchanged from September to October, down from the 0.4% jump the previous month. Compared with a year ago, consumer prices rose 3.2% in October, down from 3.7% in September.

The U.S. economy has remained strong, even though the Federal Reserve has hiked its main interest rate to its highest level since 2001 in hopes of stamping out high inflation.

With worries simmering over whether growth will remain resilient as full effects of those rate hikes make their way through the system, investors are watching to see if prices are still cooling.

The hope is that inflation will continue their decline from a peak of over 9% in the summer of 2022. That might convince the Federal Reserve no more hikes to rates are necessary and even speed up the timeline for potential cuts to interest rates.

With inflation generally cooling, Federal Reserve Chair Jerome Powell recently suggested a recent rise in longer-term Treasury yields might act as a substitute for further rate hikes. But Powell said last week the Fed would not hesitate to hike rates again if needed.

Early Tuesday, France’s CAC 40 was up 0.1%, Germany’s DAX picked up 0.4%a nd Britain’s FTSE 100 fell 0.5%.

In Asian trading, Japan’s benchmark Nikkei 225 gained 0.3% to finish at 32,695.93. Australia’s S&P/ASX 200 advanced 0.8% to 7,006.70. South Korea’s Kospi added 1.2% to 2,433.25. Hong Kong’s Hang Seng lost nearly 0.2% to 17,396.86, while the Shanghai Composite edged up 0.3% to 3,056.07.

“Asian stocks gained ground as investors awaited U.S. inflation figures, hoping to confirm that interest rates have peaked. Meanwhile, positive geopolitical sentiments filled the backdrop as investors looked forward to anticipated talks between the U.S. and China,” Stephen Innes, managing partner at SPI Asset Management, said in a written commentary.

China is due to release monthly economic indicators on Wednesday, and Japan will announce its latest growth numbers.

U.S. budget politics also are on the agenda. The House of Representatives is preparing to vote on a stopgap package to keep the U.S. government running into the new year and avert a federal shutdown. If approved, the Senate would act next, ahead of Friday’s deadline.

In other trading, benchmark U.S. crude oil lost 18 cents to $78.15 a barrel in electronic trading on the New York Mercantile Exchange. It gained $1.09 on Monday. Brent crude, the international standard, fell 14 cents to $82.38 a barrel.

In currency trading, the U.S. dollar dipped slightly to 151.70 Japanese yen from 151.72 yen. The euro rose to $1.0721 from $1.0701.

On Monday, Wall Street drifted to a mixed finish, as the S&P 500 slipped 0.1%. The Dow industrials gained 0.2% and the Nasdaq composite fell 0.2%.

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