Dow climbs 240 points despite 'hot' inflation

Top line

Stocks rallied on Tuesday despite a worse-than-expected inflation report, perhaps as stubbornly high inflation delays growth-friendly interest rate cuts, although experts say the contrarian movement makes sense.

Key facts

The S&P 500 rose 1.1%, the tech-heavy Nasdaq rose 1.6% and the Dow Jones industrial average rose 0.6%, or 240 points.

Although the morning release of the core consumer price index revealed worse-than-forecast gains and core inflation, a strange development considering sticky inflation will throw a wrench in much-desired rate cuts and last month was warmer than expected. The inflation report sent the Dow to its steepest daily loss in 11 months.

So, why the paradox? Tom Lee, head of research at boutique firm Fundstrat Global Advisors, explained to CNBC A “warm” inflation reading and strong gains signaled markets to “tear off the band-aid moment,” suggesting the market is “bearish,” a perception that overall inflation numbers are “worse” than the reality of economic conditions.

The overall composition of Tuesday's consumer price report showed “sharp normalization,” excluding rents, and the Federal Reserve explained in a note to clients the idea of ​​an interest rate cut at its June meeting. .

Giant tech stocks rallied once again on Tuesday, as shares of Microsoft, Nvidia, Amazon and Meta each gained more than 2%.

Those names got a boost from cloud computing giant Oracle's strong earnings results on Tuesday, which sent its shares up 11% to hit an all-time high, as did the company. vilified Its “enormous” potential in artificial intelligence.

Important quote

“The inflation experience is like the concentration in the stock markets right now,” Jeffrey Roach, chief economist at LPL Financial, noted in emailed comments, comparing the outsized influence of rent and gas prices on inflation to the impact of trillions of dollars in profits. Stocks like Nvidia on stock market indices.

Contra

The bond market, which moves directly with traders' expectations for interest rates, has not experienced the same positive post-CPI momentum as its stock market counterpart. Yields on 2-year and 10-year U.S. government bonds each rose more than five basis points, indicating growing confidence that the Fed will keep interest rates high for the long term (higher bond yields mean a decline in the asset class' value).

Tangent

Sitting on the sidelines on Tuesday were shares of beleaguered aerospace giant Boeing and its commercial airline customers. Shares of Boeing fell more than 4% to a five-month low, and shares of American Airlines (down 5%), Southwest Airlines (down 15%) and United Airlines (down 2%) fell.

Big number

$15 billion. That's how rich Oracle's chairman and largest individual shareholder Larry Ellison grew on Tuesday, according to Forbes' calculations. Ellison's fortune rose to the highest of any billionaire Tuesday, topping fellow tech tycoons such as Meta CEO Mark Zuckerberg and Nvidia CEO Jensen Huang for single-digit billion gains in net worth.

read more

More from ForbesInflation has been higher than expected for a fourth straight month

More from ForbesBoeing stock down 4% to 5-month low

See also  UK investigates breach of Gates' medical records

Leave a Reply

Your email address will not be published. Required fields are marked *