Stock markets rallied on Wednesday even after consumer prices came in higher than expected, and while experts believe inflation may have peaked, the Fed still needs to raise rates more aggressively as it will take considerable time for the Fed to return to normal levels. may be.
The Dow Jones Industrial Average rose 0.6%, about 200 points, the S&P 500 0.5%, and the Nasdaq Composite Index centered on technology stocks remained flat.
Stocks rose despite higher-than-expected inflation as prices surged 8.3% on an annualized basis in April, new data show. data announced by the Ministry of Labor.
Consumer prices were hotter than economists had predicted, but the inflation rate in April slowed for the first time in eight months, down from 8.5% in March. Food, lodging, air and vehicle prices all soared, but gasoline prices fell about 6%. It helped offset some of the price increase.
Moreover, some experts now predict that inflation may have peaked, although there is currently very little uncertainty about how long it will take for prices to return to normal.
Soaring after monthly inflation figures: The 10-year US Treasury yield crossed 3% again on Wednesday and some investors feared rising inflation could slow economic growth.
Technology stocks took a hit and impacted the market once again as investors continued to pull stocks from early trades. Companies like Apple, Netflix, Amazon, and Tesla all fell nearly 1% or more before offsetting their losses.
Bill Adams, chief economist at Comerica Bank, said inflation will continue to exceed the Fed’s target through the end of 2023, but the peak of inflation will be “behind us.” “The slowdown in inflation in April reversed sharply after the gasoline price surge in March, which was the cascading effect of the Russo-Ukraine war,” he explains. “Inflation was already very bad before the war, and after a slight drop in gas prices in April, inflation is still very bad.”
New inflation data surprised some investors as they continued to dump more risky assets like cryptocurrencies amid continued market sell-offs. According to Coin Metrics, the price of Bitcoin is down about 7% to about $29,000, down from $40,000 last week.
Chris Zaccarelli, CIO of the Independent Advisor Alliance, said, “The inconvenient thing is that the Fed has to raise rates faster and to a higher level than many expect.” “There will be at least four 50bps rate hikes this year,” he predicted.
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