Stock Market Today: Stocks Lose Steam After CPI Report
Stocks wavered after the April CPI report supported the case for the Fed to stop raising rates – but not cut them.
Stocks jumped after the April Consumer Price Index (CPI) showed that inflation cooled moderately last month, with prices rising by less than 5% on an annual basis for the first time in two years. Two of the three major benchmarks lost steam as Wednesday's session progressed, however, as the implications of the CPI report sunk in.
Ultimately, the major market benchmarks ended with a mixed close.
Although the inflation rate came in below economists' expectations – and gave the Federal Reserve room to pause its campaign of interest rate hikes at the next Fed meeting – it also dashed hopes for a rate cut coming anytime soon.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Consumer Price Index (CPI) for April rose 4.9% year-over-year, vs March's gain of 5%, the Bureau of Labor Statistics said Wednesday. The Federal Reserve Bank of Cleveland's "Nowcast" forecast annual inflation to increase by 5.2%. On a monthly basis, the CPI increased by 0.4% compared with March's gain of 0.1%. Economists expected monthly CPI to rise 0.6%.
Perhaps most important, core CPI, which excludes volatile food and energy prices, also came in lower than expected. Stubbornly elevated core inflation has contributed to the Fed's reluctance to stop raising interest rates. On an annual basis, core CPI rose 5.5% in April, vs estimates for a gain of 5.6%. March's year-over-year core CPI reading also came in at 5.6%.
Monthly core CPI rose 0.4% in April. Although that was the same rate of inflation seen in March, it did come in below forecasts for a 0.5% increase month-to-month.
Fed Chair Jerome Powell and the central bank's rate-setting group, known as the Federal Open Market Committee (FOMC), are open to what is being called a "hawkish pause" when it next meets in June. However, Powell has emphasized that future rate decisions will be "data dependent."
Although there will be another CPI report to digest before the FOMC's June policy decision – as well as plenty of other economic data, including the Fed's preferred inflation gauge known as the Personal Consumption Expenditures Price Index (PCE) – experts mostly agree that the April CPI report helps the case for the FOMC to pause its campaign of interest rate hikes.
That said, experts also largely agree that the CPI report doesn't support a Fed pivot toward looser monetary policy in the nearer term.
"The likelihood of a rate cut later this year is becoming more of a fantasy," says Sean Snaith, director of the University of Central Florida's Institute for Economic Forecasting. "Inflation is only slowly melting away while the labor market remains tight with significant pressure on wages, pushing us in the opposite direction of what the Fed is trying to achieve with interest rate hikes."
At the closing bell, the blue-chip Dow Jones Industrial Average slipped 0.1% to finish at 33,531, while the broader S&P 500 added 0.5% to end at 4,137. The tech-heavy Nasdaq Composite rose 1% to close at 12,306.
Which goods and services are driving inflation?
Although inflation continues to ease, prices are still rising at a pace not seen in decades. Indeed, inflation is forecast to run at about 5% for all of 2023.
Excluding the last couple of years of pandemic-induced price spikes, that would be the worst bout of inflation since 1989 and 1990. Note that over the first two decades of the 21st century, annual inflation in the U.S. averaged just 2.1%. (The Fed's inflation target is 2%.)
The fact remains that most goods and services are much more expensive than they were a year ago. To get a sense of what's driving inflation, have a look at which categories are suffering the worst cases of rising prices.
Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.
A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.
In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.
-
-
What’s in DeSantis’ $1.3 Billion Florida Tax Relief Bill?
DeSantis' $1.3 billion tax relief bill extends sales tax holidays and makes other tax cuts. Here's what you can buy tax-free — and when.
By Katelyn Washington • Published
-
Letter from the Senior Digital Editor: Celebrating Pride
Kiplinger senior digital editor Alexandra Svokos writes at the start of Pride Month.
By Alexandra Svokos • Published
-
Stock Market Today: Stocks Soar After Jobs Data, Debt Ceiling Deal
The major benchmarks rallied hard into the weekend after a mixed May jobs report and end to debt ceiling drama.
By Karee Venema • Published
-
Stock Market Today: Stocks Rally on Debt Ceiling News, Manufacturing Data
A slow start turned into a strong finish for stocks thanks to encouraging debt ceiling updates and the latest economic data.
By Karee Venema • Published
-
Is Chevron Stock Set for a Rebound?
Chevron stock received its second analyst upgrade in as many days, boosting hopes for a recovery in the lagging energy major.
By Dan Burrows • Published
-
Stock Market Today: Stocks Close Lower Ahead of Key Debt Ceiling Vote
The major benchmarks spent most of Wednesday in the red as the House prepares to vote on the debt ceiling deal this evening.
By Karee Venema • Published
-
Stock Market Today: Stocks Give Back Big Debt Ceiling Deal Gains
The major benchmarks opened solidly higher Tuesday after lawmakers announced a debt ceiling deal, but optimism faded into the close.
By Karee Venema • Published
-
Stock Market Today: Stocks Jump on Debt Ceiling Progress
The major benchmarks rallied into the long weekend after lawmakers said they're making strides in debt ceiling negotiations.
By Karee Venema • Published
-
Stock Market Today: Stocks Rise After AI Outlook Sparks Explosive Nvidia Rally
The Nasdaq and S&P 500 made impressive advances today after chipmaker Nvidia forecast record quarterly revenue on AI growth.
By Karee Venema • Published
-
Is Nvidia Stock Just Getting Started?
Nvidia stock has more than doubled this year already, but analysts say explosive growth in AI gives NVDA plenty more upside ahead.
By Dan Burrows • Last updated