May 20, 2022

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Stocks rise on inflation data

Stocks rise on inflation data

Stocks swung between gains and losses on Wednesday after new data showed that inflation eased slightly in April but not as much as economists had expected.

The S&P 500 was up 0.7% in morning trade. The index snapped a three-day losing streak on Tuesday, pausing at pressure stretch It came as investors prepared for the Federal Reserve to continue raising interest rates to curb decades-old high inflation.

The Dow Jones Industrial Average rose 0.8%, while the technology-focused Nasdaq Composite rose 0.2%.

The yield on 10-year Treasuries – which supports borrowing costs across the economy – rose to 3.014% from 2.990% at Tuesday’s settlement. Earlier in the morning, yields rose to 3.074% before pulling back. Yields and bond prices move in opposite directions.

The CPI rose 8.3% in April from the same month last year, slowing from the 8.5% annual rate in March but higher than the 8.1% economists had expected. The annual drop in inflation last month marks the first monthly easing of price increases since August 2021.

Michael Farr, CEO and founder of Farr, Miller & Washington, said investors hoping for a definitive sign that inflation has peaked may have been spooked by the higher-than-expected reading.

“First aid is still slowly coming off,” said Mr. Farr. “According to the Federal Reserve, we are not close to the end of this process that everyone wants.

The trajectory of inflation and wages will determine how much the Fed will raise interest rates at the next policy meeting. The central bank last week raised interest rates by half a percentage point, Biggest rise since 2000and agreed to a plan to shrink its $9 trillion portfolio of assets — and begin its campaign to a higher level to rein in 40-year-old high inflation.

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“What we saw this morning was mostly in line with expectations — at least my expectations,” said David Kottock, chief investment officer at Cumberland Advisors. However, volatile markets were poised to respond aggressively to any headline that indicated persistent price pressures. “We are in such difficult times,” he said.

Stocks, particularly in the US, have been hit by a sell-off in recent weeks. Investors compete with Relax in easy monetary policies That boosted stock and bond gains since the early days of the pandemic.

Traders worked on the floor of the New York Stock Exchange on Tuesday.


picture:

Brendan McDermid/Reuters

Adding to the uncertainty for investors is the war in Ukraine, which has driven inflation higher by boosting commodity prices, and the Covid-19 shutdown in China that threatens to damage the global economy.

“If we only have high policy rates, or we only have high inflation, or we only have China or we only have Ukraine, we probably can manage that,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “But we have it all at once. That’s why it’s a particularly challenging environment.”

Mr. Morris said US stocks could come under more pressure, saying valuations had fallen to mid-levels that were historically expensive before the sell-off.

Elsewhere, strong earnings reports from some companies led to gains. shares

electronic arts

It rose 11% after the video game company announced its revenue in the last fiscal year It rose 24% to $6.99 billion. donut series

Crispy Cream

It posted a 6.9% rise after reporting earlier Wednesday that net revenue jumped 16% year-over-year in the three months to March.

shares

Coinbase Global

It is down 17% after the cryptocurrency exchange said it is… Users refused from the previous quarter. shares

unit programs

It fell 30% after the video game software developer extended its loss and provided second-quarter revenue guidance less than analysts’ expectations.

converts

It rose 8.3 percent after the computer services company said a group of investors took it private.

Oil prices rose. Brent crude, the global benchmark, rose 3.5 percent to $106.02 a barrel.

Overseas markets were widely higher. The Stoxx Europe 600 Index rose 0.7%, led by auto and real estate stocks. In Asia, Hong Kong’s Hang Seng Index is up 1% and the Shanghai Composite Index is up 0.8%.

Write to Joe Wallace at [email protected]

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