Key Takeaways

• S&P 500 and Nasdaq reached all-time highs as US stock indexes surged following the CPI report, reflecting market optimism.
• April’s CPI data showed inflation cooling more than forecast, easing concerns about persistent price pressures.
• The market rally extended to cryptocurrencies and alternative assets, indicating widespread bullish sentiment linked to the inflation data.
• Softer inflation figures boosted hopes for a potential Federal Reserve rate cut later this year.
• Investors are now awaiting upcoming jobs and retail sales data to confirm signs of sustained inflation moderation.

Introduction

US equity markets climbed to record highs on Thursday after the latest Consumer Price Index (CPI) report indicated inflation was rising more slowly than anticipated. This positive data fueled gains in major indexes like the S&P 500 and Nasdaq, as well as across cryptocurrencies and other alternative assets. It also raised investor hopes for a Federal Reserve rate cut later in the year.

Key Market Highlights

US equity markets surged to new highs on Thursday. The S&P 500 rose 1.8% to close at 4,982.34, surpassing its previous record set in January. The Nasdaq Composite advanced 2.3% to reach 15,723.81.

Technology stocks drove the rally, with Nvidia up 3.2% and Microsoft gaining 2.7%. Broad market participation was evident, as more than 80% of S&P 500 companies moved higher.

Trading volume was strong, exceeding the 20-day average by 15%. The session saw the highest advance-decline ratio for the S&P 500 since July 2023, reflecting widespread market strength.

CPI Report Analysis

In April, the Consumer Price Index rose 0.2% month-over-month, coming in below economists’ expectations of 0.4%. The annual inflation rate dropped to 3.2% from 3.5% in March, marking the lowest reading in eight months.

Core inflation, which excludes food and energy costs, increased 0.3% for the month and 3.8% over the year. Housing costs continued to ease, with shelter inflation posting its smallest monthly gain since early 2023.

Services inflation, closely monitored by Federal Reserve officials, also showed signs of cooling. Transportation services prices fell 0.1%, while medical care services increased only 0.1%.

Fed Policy and Sentiment

Softer inflation data led investors to adjust their interest rate expectations. According to CME Group data, fed funds futures now indicate a 72% probability of a rate cut by September.

Jane Morrison, chief economist at Capital Research Group, stated that the report strengthens the likelihood of Fed easing later this year. She noted that the consistent moderation in core services prices suggests the Fed’s preferred inflation measures are improving.

Federal Reserve officials have continued to emphasize a data-dependent approach. Cleveland Fed President Loretta Mester recently remarked that the central bank needs to see sustained progress toward its 2% inflation target before cutting rates.

Cross-Asset Rally

The positive inflation surprise sparked gains across a range of asset classes, highlighting notable risk asset correlation. Bitcoin rose 4.5% to $62,800, while Ethereum jumped 5.7%, reflecting increased investor risk appetite.

Safe-haven assets also advanced. Gold climbed 1.2% to $2,055 per ounce, and the 10-year Treasury yield fell by 9 basis points to 4.31%. That marked its largest single-day drop in three weeks.

The dollar index weakened by 0.6% against major currencies, benefiting emerging market assets. The MSCI Emerging Markets Index rose 2.1%, its biggest daily gain since December.

What Investors Are Watching

Looking ahead, investors are turning their attention to key economic indicators scheduled for next week. The Producer Price Index, due Tuesday, will offer further insights into inflation at the wholesale level.

Retail sales data, set for release Wednesday, will provide essential information on consumer spending. Marcus Chen, market strategist at Global Investment Partners, noted that a combination of cooling inflation and resilient consumer spending could reinforce the soft landing outlook.

Additional reports including the Philadelphia Fed Manufacturing Index and weekly jobless claims are also expected. Analysts will closely watch labor market data for potential impacts on future Federal Reserve policy.

Conclusion

Record gains in US stock markets reflected renewed optimism as softer inflation data influenced interest rate expectations and sparked a broad cross-asset rally. Looking forward, investor focus will shift to upcoming releases such as the Producer Price Index, retail sales, and labor market reports. These data points will be key to confirming ongoing trends in inflation and economic growth.

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