Nasdaq, S&P 500 Reach Best Levels In Over A Year Following Inflation Data

(RTTNews) - Stocks moved mostly higher during trading on Wednesday, extending the upward move seen to start the week. With the continued advance, the Nasdaq and the S&P 500 ended the session at their best closing levels in over a year.

The tech-heavy Nasdaq jumped 158.26 points or 1.2 percent to 13,918.96 and the S&P 500 climbed 32.90 points or 0.7 percent to 4,472.16. The narrower Dow pulled back well off its best levels of the day but still closed up 86.01 points or 0.3 percent at 34,347.43.

The strength on Wall Street came following the release of a highly anticipated Labor Department report showing consumer prices increased by less than expected in the month of June.

The Labor Department said its consumer price index rose by 0.2 percent in June after inching up by 0.1 percent in May. Economists had expected consumer prices to climb by 0.3 percent.

Excluding food and energy prices, core consumer prices still increased by 0.2 percent in June after rising by 0.4 percent in May. Core consumer prices were also expected to rise by 0.3 percent.

The report also showed the annual rate of consumer price growth slowed to 3.0 percent in June from 4.0 percent in May. Economists had expected the rate of growth to slow to 3.1 percent.

The annual rate of core consumer price growth also decelerated to 4.8 percent in June from 5.3 percent in May. The rate of growth was expected to slow to 5.0 percent.

While the Federal Reserve is still widely expected to raise interest rates by another quarter point later this month, the data has led to renewed optimism that will be the end of the central bank's rate-hiking cycle.

"The rate hike for this month is likely a foregone conclusion and this report won't change that, but after the Fed raises rates by 25 bps at the end of the month, this report adds a lot more weight to the doves' arguments, who are going to push for another pause in September and potentially an end to rate hikes for the year," said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

He added, "To be fair, we have a lot more data between now and September's meeting, let alone the November meeting, which is likely to be the next 'live' meeting after July, but the evidence is building that the Fed will 'watch and wait' after they raise rates this month."

Sector News

Gold stocks turned in some of the market's best performances on the day, resulting in a 5.2 percent spike by the NYSE Arca Gold Bugs Index. With the surge, the index reached its best closing level in over a month.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for August delivery soaring $24.60 to $1,961.70 an ounce.

Easing interest rate concerns also contributed to substantial strength among housing stocks, as reflected by the 2.1 percent jump by the Philadelphia Housing Sector Index.

Steel, semiconductor and chemical stocks also saw considerable strength on the day, while airline stocks came under pressure over the course of the session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index slid by 0.8 percent, while Hong Kong's Hang Seng Index jumped by 1.1 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the U.K.'s FTSE 100 Index shot up by 1.8 percent, the French CAC 40 Index and the German DAX Index surged by 1.6 percent and 1.5 percent, respectively.

In the bond market, treasuries spiked in reaction to the tamer-than-expected inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 11.9 basis points to 3.861 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to separate Labor Department reports on producer price inflation and weekly jobless claims.