Stocks surged on Wednesday, with the S&P 500 (SPX), Nasdaq Composite (NDAQ), and Nasdaq-100 (NDX) posting new records for a third consecutive day. However, the Dow Jones Industrial Average (DJIA) lagged behind other main indexes, ending the day in the red.
May’s inflation report injected significant optimism into the markets, confirming the continued disinflation trend. Both CPI and Core CPI (which excludes volatile food and energy prices) came in lower than expected on monthly and annualized basis. Most of the CPI components receded, with only shelter cost increases still running hot, although the trend of slow easing seen in the last several months remained intact. Importantly, core inflation eased to its slowest rate since April 2021, suggesting that the Federal Reserve has the upper hand in its battle with sticky inflation.
Following the Fed’s policy meeting, stocks gave back some of their post-CPI report rally. Though the meeting was not expected to produce any immediate changes in interest rates, sentiment was slightly shaken after the policymakers said they now foresee only one interest-rate cut this year. This contrasts with the central bank’s March projections, which penciled in three rate cuts for 2024.
Investors’ disappointment with the less dovish-than-hoped Fed rate outlook was more than compensated by positive surprises received from technology majors. Thus, Apple (AAPL) shares climbed, extending their winning streak, with the company’s market cap briefly overtaking Microsoft’s (MSFT). NVIDIA (NVDA) continued its upward march, supported by a strong rally in its business partner Oracle (ORCL). After the closing bell, chip and infrastructure giant Broadcom (AVGO) released strong quarterly results and announced a long-awaited stock split, supporting futures.
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