Highlights
Equities switched into risk-on mode Wednesday after a better than expected inflation report with not much reaction to a somewhat more hawkish than expected Federal Reserve policy announcement. The Dow Jones industrial average eased 0.1 percent, the S&P 500 gained 0.9 percent to top 5,400 for the first time, and the Nasdaq was up 1.5 percent. Bond yields declined while oil prices and the dollar rose.
News that consumer prices were flat overall in May from April and up a modest 0.2% in the core renewed expectations for multiple rate cuts this year and the hoped-for soft landing with disinflation continuing and job growth holding strong. S&P 500 and Nasdaq held onto their gains after the as-expected news that the Fed held rates steady and despite an updated dot plot showing officials generally see only one rate cut this year, down from three in the March update. Fed Chair Jerome Powell pretty much reiterated the recent line that officials want more confidence about the inflation trend and will continue to watch incoming data. Markets are pricing in two rate cuts this year, notwithstanding the Fed dots.
Big technology shares, especially software and chipmakers, continued to lead the winners on hopes for artificial intelligence to lead a business boom. Apple and Oracle were in focus with Oracle rising largely on its bullish AI guidance and Apple buoyed by plans to incorporate AI in its products, and Nvidia on its standing as leader of the AI pack.
Other outperformers included home builders, building materials, airlines, asset managers, investment banks and regional banks, Lagging were pharma, steel, managed care, energy, rails, food, aerospace & defense, telecom, apparel and health & personal care stocks.
News that consumer prices were flat overall in May from April and up a modest 0.2% in the core renewed expectations for multiple rate cuts this year and the hoped-for soft landing with disinflation continuing and job growth holding strong. S&P 500 and Nasdaq held onto their gains after the as-expected news that the Fed held rates steady and despite an updated dot plot showing officials generally see only one rate cut this year, down from three in the March update. Fed Chair Jerome Powell pretty much reiterated the recent line that officials want more confidence about the inflation trend and will continue to watch incoming data. Markets are pricing in two rate cuts this year, notwithstanding the Fed dots.
Big technology shares, especially software and chipmakers, continued to lead the winners on hopes for artificial intelligence to lead a business boom. Apple and Oracle were in focus with Oracle rising largely on its bullish AI guidance and Apple buoyed by plans to incorporate AI in its products, and Nvidia on its standing as leader of the AI pack.
Other outperformers included home builders, building materials, airlines, asset managers, investment banks and regional banks, Lagging were pharma, steel, managed care, energy, rails, food, aerospace & defense, telecom, apparel and health & personal care stocks.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
