New inflation data boosts optimism among Wall Street investors.
Towards the end of the day, things are looking good on Wall Street once more. The reason for this is the moderately quieter inflation. This has also created optimism for a potential shift in monetary policy. US investors are regaining their willingness to buy.
The anticipation for interest rates stemming from the US inflation report for April fueled the indices on Wall Street to hit new record highs. The Dow Jones Industrial Average of blue-chip companies closed up by 0.9% at 39,908 points on Wednesday. Throughout the day, it had come within 65 points of the 40,000 mark. The broader S&P 500 surged to 5,311 points and finished the day 1.2% higher at 5,308. The Nasdaq technology index concluded trading 1.4% higher at 16,742, just seven points below its peak for the day.
The inflation in the US softened a bit in April - to 3.4% compared to the same month the previous year, down from 3.5% in March. This was no surprise to economists. From March to April, prices rose by 0.3%. Experts expected a 0.4% rise in that period. "The first positive surprise in the inflation rate since the start of the year will allay fears that inflation may be on the rise again," said Seema Shah, chief strategist at asset manager Principal. "This is good news for the market as it keeps the possibility of the Fed's rate cuts for 2024 alive." The Fed, led by Chairman Jerome Powell, is attempting to lower the inflation rate to the target of 2% without hindering the economy too much.
The recent sluggish reduction in inflation prompted stock market analysts to push back their predictions for the first Fed interest rate cut from March to September. As it stands, the estimated probability of monetary relaxation in the first month of fall is about 75% on the futures market. Prior to the US inflation report, this figure was around 65%. It's still highly likely that interest rate cuts will take place in November and December. The US dollar index fell 0.7% to 104.31 points following the release of the data.
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However, the recent rally in so-called meme stocks is now flatlining. The shares of video game retailer GameStop declined by 19% and those of cinema chain AMC dropped by 20%. A planned $5 billion loan package sale from the US regional bank New York Community Bancorp failed to inspire investors. The shares initially gained up to about 3% but later fell by 5.7%. The bank intends to sell its mortgage loans to JP Morgan. The deal could potentially weaken the bank's profitability, according to experts.
On the other hand, stocks in the pharmaceutical companies Vanda and Biogen were in demand. The shares jumped by 4.9% and 3.8% respectively. Vanda announced that a second study had confirmed the effectiveness of the drug Tradipitant against nausea. Biogen revealed a milestone for its new Alzheimer's drug Leqembi. Partner Eisai stated that it had initiated the approval process for a new dosage form of the drug.
You can find all updates on stock market events today here.
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Despite the positive sentiment on Wall Street due to moderated inflation, the rally in meme shares such as GameStop and AMC has slowed down. The planned loan sale from New York Community Bancorp failed to boost investor confidence in these meme stocks, resulting in declines. Conversely, pharmaceutical companies Vanda and Biogen saw their shares increase after positive news regarding their drugs.
Source: www.ntv.de
