S&P 500 and Nasdaq Hit New Record Highs After Inflation Cooled In May

Barry Adams
12 Jun, 2024
New York City

Stocks opened sharply higher, and Treasury yields edged lower after consumer price inflation eased in May, raising hopes for at least one rate cut before the year's end. 

The S&P 500 index and the Nasdaq Composite advanced more than 1% after consumer price and core inflation unexpectedly slowed in May. 

Stocks have been under pressure for a few weeks due to rate uncertainty and the dashed hopes of rate cuts. 

At the start of the year, investors were looking for as many as four cuts, but those expectations have been lowered after the persistent inflation over the last eighteen months. 

Consumer price inflation peaked in June 2022 at 9.1%, and price pressures have steadily eased to 3% in June 2023. 

However, inflation has failed to move lower over the last year and ranged between 3% and 4%, and core inflation has also failed to budge as well. 

Despite eleven rate hikes in 2022 and 2023, inflation has failed to dip to the 2% target rate set by the Fed, indicating interest rates are not restrictive enough. 

The Federal Reserve is widely anticipated to leave the fed funds rate range unchanged between 5.25% and 5.50% later today at the end of the two-day policy meeting.  

 

Consumer Price Inflation Cools In May but Stays elevated

The annual rate of consumer inflation unexpectedly cooled to 3.4% in May, the U.S. Bureau of Labor Statistics said on Wednesday. 

Consumer price inflation decreased for the second month in a row and fell from 3.5% in March to 3.4% in April. 

Food price inflation slowed to 2.1% from 2.2% in April, shelter inflation slowed to 5.4% from 5.5%, and transportation dropped 10.5% from 11.2%. 

The annual rate of core inflation slowed to 3.4% in May, the lowest rate since April 2021. 

On a monthly basis, consumer price inflation was unchanged from the previous month after rising 0.3% in April, and the monthly core rate of inflation slowed to 0.2% from 0.3% in the previous month. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 1.1% to 5,435.82, and the Nasdaq Composite advanced 1.6% to 17,625.51. 

The yield on 2-year Treasury notes edged lower to 4.69%, 10-year Treasury notes decreased to 4.29%, and 30-year Treasury bonds edged higher to 4.46%.

WTI crude oil increased $1.33 to $79.27 a barrel, and natural gas prices fell 8 cents to $3.04 a thermal unit.

Gold increased by $21.50 to $2,335.92 an ounce, and silver rose 65 cents to $29.95. 

The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.38.

 

U.S. Stock Movers

Oracle Corp. soared 11.1% to $138.61 despite the database developer reporting weaker-than-expected quarterly results. 

Investors bid up the stock after the company announced an artificial intelligence partnership with Google and OpenAI. 

Rubrik declined 1.8% to $34.48 after the cloud computing company reported a weaker-than-expected outlook despite reporting higher-than-expected quarterly revenue of $187 million. 

Rentokil Initial soared 14.5% to $30.89 after activist investor Trian Fund acquired a sizeable stake in the company.