[New York Stock Market] April CPI Slowdown Drives Broad Gains... 3 Major Indexes Reach All-Time Highs

Core CPI Growth Rate in April Hits Lowest in 3 Years
Retail Sales Stagnate Last Month...Signs of Economic Cooling
75% Forecast for September Rate Cut...US Treasury Yields Fall

The three major indices of the U.S. New York stock market all closed higher on the 15th (local time), hitting record highs. The core Consumer Price Index (CPI) for last month recorded its lowest increase in three years, and retail sales showed stagnation, reviving expectations that the Federal Reserve (Fed) will cut interest rates within the year. Optimism about rate cuts caused U.S. Treasury yields to plunge, leading to a significant jump in tech stocks.

[Image source= Xinhua News Agency]

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,908, up 349.89 points (0.88%) from the previous trading day. The large-cap-focused S&P 500 index ended at 5,308.15, up 61.47 points (1.17%). The tech-heavy Nasdaq index closed at 16,742.39, up 231.21 points (1.4%). All three major indices set new all-time highs.

On the same day, the U.S. Department of Labor announced that the core CPI for April rose 3.6% year-on-year, the lowest figure in three years since April 2021. This matched experts' expectations (3.6%) and was below the previous month's increase (3.8%). The month-on-month increase was 0.3%, equal to the forecast (0.4%) but lower than the previous month (0.4%). The core CPI excludes volatile energy and food prices, showing the underlying trend of inflation and is one of the inflation indicators the Fed closely monitors.

The headline CPI rose 0.3% month-on-month and 3.4% year-on-year. These figures were below or in line with market expectations (0.4% and 3.4%, respectively) and both were lower than the previous month's results (0.4% and 3.5%). Housing costs and gasoline price increases accounted for more than 70% of the CPI rise.

Investors cheered as last month's CPI increase slowed and matched expert forecasts. From January to March this year, CPI increases consistently exceeded market expectations, which had completely dampened hopes for a rate cut in the first half of the year. Fed Chair Jerome Powell also attended the Foreign Bankers Association (FBA) annual meeting in Amsterdam, Netherlands, the day before, stating that inflation figures were "higher than expected" and that "we need to be patient and allow restrictive monetary policy to take effect."

Retail sales, an indicator of the U.S. economic trend, also showed stagnation last month, further boosting expectations for a rate cut. According to the U.S. Department of Commerce, April retail sales stood at $705.2 billion, unchanged from the previous month. This was well below market expectations (0.4%) and the previous month's performance (0.6%). Retail sales are considered a pillar of the U.S. real economy, accounting for two-thirds of it, and serve as a comprehensive indicator of economic trends. The data was interpreted as a signal that the U.S. economy might slow down due to inflation and the impact of high interest rates pressuring household spending.

Following the release of the CPI and retail sales data, market expectations for a rate cut in September spread. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market reflected over a 75% chance that the Fed would cut rates by at least 0.25 percentage points at the September Federal Open Market Committee (FOMC) meeting, up from 65% the previous day.

U.S. Treasury yields also plunged on rate cut expectations. The 10-year U.S. Treasury yield, a global bond yield benchmark, fell 10 basis points (bp) from the previous trading day to 4.34%, while the 2-year U.S. Treasury yield dropped 9 bp to 4.72%.

Charles Schwab's Chief Bond Strategist, Kathy Jones, said, "The door to a potential rate cut by year-end has opened," adding, "The Fed will need a few more data points showing inflation is slowing before taking action."

Brian Nick, Senior Investment Strategist at Macro Institute, said, "The market got the report it wanted," diagnosing that "these figures (April CPI and retail sales) firmly establish the basis for the Fed to start cutting rates this year." He also predicted, "Many high-growth companies like Nvidia will benefit from rate cuts."

The market is also expected to check employment trends through the weekly initial jobless claims data released the following day. The market expects initial jobless claims to have decreased to 220,000 from 231,000 the previous week.

By stock, tech stocks rose significantly. Nvidia surged 3.58%, while Apple and Microsoft (MS) rose 1.22% and 1.75%, respectively. GameStop plummeted 18.87%. After a Reddit trader who led the 2021 meme stock craze posted on the social networking service X (formerly Twitter) for the first time in three years, the stock price surged 74.26% and 60.05% over the past two days but reversed to a decline after three days.

International oil prices are on the rise. West Texas Intermediate (WTI) crude oil rose $0.84 (1.08%) from the previous trading day to $78.86 per barrel, and Brent crude, the global oil price benchmark, increased $0.57 (0.69%) to $82.95.