U.S. stocks rose Tuesday as investors focused on a report showing so-called core inflation slowing even as consumer prices rose by the fastest rate in 40 years.
What’s happening
- The Dow Jones Industrial Average DJIA rose 196 points, or 0.6%, to 34,504.
- The S&P 500 SPX was up 32 points, or 0.7%, at 4,444.
- The Nasdaq Composite COMP advanced 133 points, or 1%, to 13,545.
On Monday, the Dow fell 413 points, or 1.2%, while the S&P 500 declined 1.7% and the Nasdaq Composite dropped 2.2%. The S&P 500 ended the session down 7% on the year.
What’s driving markets
U.S. consumer prices rose 1.2% in March, the Labor Department reported on Tuesday. Over the last 12 months, prices have gained 8.5%.
But the news that cheered investors was that core price growth slowed to 0.3%.
“March will likely be the peak for inflation as the indices will be lapping some strong year-ago readings starting in April, while gasoline prices have eased off lately,” said Katherine Judge, senior economist at CIBC Capital Markets.
The yield on the benchmark 10-year Treasury BX:TMUBMUSD10Y, which on Monday reached a three-year high, dropped to 2.73%. The surge in yields has been making stocks less attractive on a relative basis and has weighed in particular on technology and other so-called growth shares whose valuations are based on earnings and cash flow far into the future.
“Broadly speaking, the inflation report tells the story most had expected: that inflation is high and still rising. The lingering question is how much more upside there could be in the inflation rate before it rolls over,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors, in a note.
“Many economists are still pointing to a probability that the 12-month gauge is very close to peaking. Whether that is the case or not is unlikely to alter the near-term path for the Fed,” he said.
Companies in focus
- Shares of CarMax Inc. KMX fell 5% after the used-car retailer missed fiscal fourth-quarter profit estimates, offsetting a revenue beat.
How other assets are trading
- The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was down 0.1%.
- Oil futures bounced sharply higher, with the U.S. benchmark CL up 4.6% at $98.61 a barrel. Gold futures GC00 rose 1.3% to trade near $1,974 an ounce.
- The Stoxx Europe 600 XX:SXXP fell 0.4%, while London’s FTSE 100 UK:UKX declined 0.8%.
- The Shanghai Composite CN:SHCOMP rose 1.5%, while the Hang Sent Index HK:HSI rose 0.5% in Hong Kong and Japan’s Nikkei 225 JP:NIK slumped 1.8%.