In a positive turn for Wall Street, major stock indexes saw bullish momentum on Tuesday, buoyed by a pullback in Treasury yields. Investors are eagerly awaiting the release of crucial inflation data later in the week, which could significantly affect the Federal Reserve’s monetary policy decisions.
All eyes are on the upcoming March US Consumer Price Index (CPI) report, scheduled for Wednesday. Analysts predict an increase in general inflation to 3.4% year-on-year, compared to 3.2% in February. The core CPI figure, excluding volatile components such as food and energy, is expected to decline slightly to 3.7% year-on-year, down from 3.8% in February.
Mark Luschini, chief investment strategist at Janney Montgomery Scott, commented: “Given the underlying strength of the economy, it would not be surprising if the CPI was slightly higher than expected. However, this does not appear to be of significant concern to investors.” He added: “Prevailing sentiment suggests that inflationary pressures will eventually ease, allowing the Federal Reserve room to maneuver with interest rate adjustments.”
Amid signs of a strong U.S. economy, investors have tempered their expectations about the extent of the Federal Reserve’s interest rate cuts this year. Current projections indicate a reduction of about 60 basis points, the lowest since October, compared with a previous forecast of around 150 basis points in early 2024, according to LSEG data.
Traders are currently pricing in a nearly 53% chance of a rate cut of at least 25 basis points in June, as indicated by CME’s FedWatch tool, up from 64% last week.
Stocks found support as the 10-year Treasury yield fell from its November high in the previous session, currently sitting at 4.3837%.
In terms of market performance, all three major indexes finished flat on Monday, with gains limited by a rise in Treasury yields following last week’s strong jobs report.
Key minutes from the Federal Reserve’s March meeting, at which it reiterated its guidance for three rate cuts this year, are anticipated later in the week and could provide valuable insight into the central bank’s stance on monetary easing.
Tech giant Alphabet saw a 1.4% rise after Google revealed details of a new version of its AI chips for data centers.
As of 9:36 a.m. ET, the Dow Jones Industrial Average rose 71.49 points, or 0.18%, to 38,964.29, the S&P 500 gained 15.88 points, or 0.31%, to 5,218.27, and the Nasdaq Composite gained 63.11 points, or 0.39%, to 16,317.07.
All 11 major S&P 500 sectors posted gains, with real estate and communications services leading the way.
Among other notable stocks, Amazon.com, Meta Platforms and Microsoft saw gains ranging from 0.2% to 0.5%.
Digital Realty Trust rose 1.9% following Wells Fargo’s upgrade of the data center operator to “overweight,” projecting potential growth in leasing volumes into 2024.
On the contrary, stocks related to cryptocurrencies and blockchain faced declines in early trading, following the downward trend in bitcoin prices. Companies like Coinbase Global, Marathon Digital, and MicroStrategy saw drops of between 0.1% and 4.2%.
Issues that rose exceeded those that fell by a ratio of 4.07 to 1 on the New York Stock Exchange and 2.39 to 1 on the Nasdaq.
The S&P index recorded 12 new 52-week highs and no new lows, while the Nasdaq recorded 32 new highs and 19 new lows.
Also read: US futures rise on strong jobs report despite market volatility