Relatively Tame Inflation Data Contributes To Strength On Wall Street

(RTTNews) - Stocks moved mostly higher during trading on Tuesday, extending the upward move seen over the course of Monday's session. With the continued advance, the Nasdaq and the S&P 500 once again reached their best closing levels in over a year, while the Dow set a four-month closing high.

The major averages finished the day off their highs of the session but still firmly positive. The Nasdaq advanced 111.40 points or 0.8 percent to 13,573.32, the S&P 500 climbed 30.08 points or 0.7 percent to 4,369.01 and the Dow rose 145.79 points or 0.4 percent to 34,212.12.

The continued strength on Wall Street came following the release of the Labor Department's highly anticipated report on consumer price inflation in the month of May, which showed prices edged slightly higher.

The report said the consumer price index inched up by 0.1 percent in May after climbing by 0.4 percent in April. Economists had expected prices to tick up by 0.2 percent.

Excluding food and energy prices, core consumer prices rose by 0.4 percent in May, matching the increase seen in each of the two previous months as well as economist estimates.

The Labor Department also said the annual rate of consumer price growth slowed to 4.0 percent in May from 4.9 percent in April. Economists had expected the pace of growth to slow to 4.1.

The year-over-year growth in May marked the smallest annual increase since the period ending March 2021.

The annual rate of core consumer price growth also slowed to 5.3 percent in May from 5.5 percent in April, in line with expectations.

The data added to optimism about the Federal Reserve pausing its recent interest rate increases when the central bank announces its monetary policy decision on Wednesday.

Following the release of the report, CME Group's FedWatch Tool is indicating a 91.9 percent chance the Fed leaves interest rates unchanged.

"Wall Street is becoming a little bit hopeful here that an FOMC June skip could eventually become a July pause," said Edward Moya, senior market analyst at OANDA.

He added, "Inflation is mostly heading lower and some of the leading indicators (car wholesale prices, weakening consumer) support the argument that the disinflation process will continue."

Sector News

Steel stocks moved sharply higher after China's central bank unexpectedly lowered a short-term lending rate, resulting in a 2.3 percent surge by the NYSE Arca Steel Index. The index reached a nearly two-month closing high.

Considerable strength was also visible among chemical stocks, driving the S&P Chemical Sector Index up by 2.2 percent to its best closing level in well over a month.

Oil service stocks also saw significant strength amid a rebound by the price of crude oil, with the Philadelphia Oil Service Index climbing by 1.7 percent.

Banking, semiconductor and airline stock also showed notable moves to the upside, reflecting broad bsed buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index shot up by 1.8 percent, while Hong Kong's Hang Seng Index climbed by 0.6 percent.

The major European markets also moved to the upside on the day. While the German DAX Index advanced by 0.8 percent, the French CAC 40 Index increased by 0.6 percent and the U.K.'s FTSE 100 Index rose by 0.3 percent.

In the bond market, treasuries moved lower over the course of the session after failing to sustain an early upward move. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.9 basis points at 3.784 percent.

Looking Ahead

The Fed's monetary policy announcement is likely to be in the spotlight on Wednesday, while traders are also likely to keep an eye on a Labor Department report on producer price inflation.