U.S. Stocks Rise on Expectations of Early End to Fed’s Rate-Hike Cycle
U.S. stocks rose Thursday morning, extending the previous session’s gains after cooler-than-expected inflation data raised expectations of an early end to the Federal Reserve’s rate-hiking cycle.
The Dow Jones Industrial Average was up 0.2%, the S&P 500 was up 0.4%, and the Nasdaq Composite was up 0.7%.
The gains came after the Labor Department reported that U.S. inflation cooled in June, with the consumer price index rising 3% year-over-year, down from 8.6% in May. Core inflation, which excludes food and energy, rose 0.2% year-over-year, down from 0.6% in May.
The weaker-than-expected inflation data raised expectations that the Fed may not need to raise interest rates as aggressively as previously thought. The Fed is expected to raise rates by 0.75 percentage points at its meeting later this month, but some analysts believe that this may be the peak of the Fed’s rate-hiking cycle.
“The Fed is likely to remain data-dependent and could pause its rate-hiking cycle if inflation continues to cool,” said Michael Schumacher, chief investment officer at Wells Fargo Asset Management.
The gains in stocks were broad-based, with all 11 major S&P 500 sectors trading higher. Technology stocks were among the biggest gainers, with the Nasdaq 100 rising 0.7%.
In other news, Walt Disney announced that it is extending CEO Bob Iger’s contract through 2026. PepsiCo raised its full-year forecast, and Delta Air Lines reported its best-ever quarterly revenue and earnings.
Oil prices rose slightly Thursday, hovering near three-month highs. China’s crude imports in June rose over 45% on the year, hitting its second-highest monthly figure on record.
Gold prices also rose slightly, while the euro strengthened against the dollar.
The overall sentiment in the markets was positive, as investors welcomed the weaker-than-expected inflation data and the signs of a recovery in China. However, some analysts warned that the gains could be short-lived, as the Fed is still expected to raise interest rates in the coming months.