US stock futures rise as cooling inflation powers Wall St to record high
U.S. stock index futures rose in evening deals on Wednesday, extending gains after signs of a mild decline in consumer inflation drove Wall Street to record highs on hopes of interest rate cuts.
Wall Street rallied, while the dollar and Treasury yields fell after slightly softer-than-expected consumer price index data saw traders grow more convinced that the Federal Reserve will begin cutting interest rates in September.
These gains spilled over into after-hours trading, with S&P 500 Futures up 0.1% at 5,338.75 points. Nasdaq 100 Futures rose 0.2% to 18,724.50 points, while Dow Jones Futures rose 0.1% to 40,092.0 points by 20:17 ET (00:17 GMT).
Cooling CPI boosts September rate cut bets
Data on Wednesday showed CPI inflation grew at a slightly softer-than-expected month-on-month rate in April, while core CPI, which excludes volatile food and energy prices, fell to an annualized 3.6% from 3.8% in March.
While inflation did ease in April, it still remained well above the Fed’s 2% annual target. It also came on the heels of a stronger-than-expected producer price index print on Tuesday.
Still, investors were seen increasing expectations for a 25 basis point rate cut in September, expectations for which now stood at a 53.8% probability, according to the CME Fedwatch tool . This was up from the 49.0% chance seen last week.
Wall Street rallied on the prospect of interest rate cuts, especially as a slew of Fed officials signaled that inflation will be a key consideration for cutting rates.
Weak retail sales data for April, released on Wednesday, also pushed up hopes that inflation will cool in the coming months.
Technology stocks were also the biggest benefactors of this trade.
The S&P 500 rose 1.2% to 5,308.15 points, while the NASDAQ Composite rose 1.4% to 16,742.39 points on Wednesday. The Dow Jones Industrial Average rose 0.9% to 39,908.0 points, with all three benchmarks closing at record highs.
Meme stock rally cools as GME, AMC tumble
A two-day rally in the so-called meme stocks ran out of steam on Wednesday, with GameStop Corp (NYSE:GME) and AMC Entertainment Holdings Inc (NYSE:AMC) both sliding around 20% during the session. The two saw extended losses in aftermarket trade, falling 9% and 6.4%, respectively.
A rally in meme stocks had been triggered chiefly by the social media account of Keith Gill, whose “Roaringkitty” handle on X began posting after a nearly three year absence. Gill was a figurehead of the meme stock rally in 2021, particularly his posts on Gamestop.
Aftermarket movers: Chubb hits record high as Berkshire takes stake
Shares of insurer Chubb Ltd (NYSE:CB) surged over 7% to a record high in after-hours trade, after Warren Buffett’s Berkshire Hathaway Inc (NYSE:BRKa) revealed it had taken a $6.72 billion stake in the firm.
Cisco Systems Inc (NASDAQ:CSCO) rose nearly 5% after the communications equipment maker clocked stronger-than-expected quarterly earnings.
Demand for US stocks can be a complex topic, but here’s a breakdown:
Generally:
- Demand is a major factor influencing stock prices. High demand pushes prices up, while low demand pushes them down.
Factors affecting Demand:
- Economic Data: Strong economic data like GDP growth suggests companies will be profitable, which increases demand for their stocks.
- Interest Rates: Lower interest rates make stocks more attractive compared to bonds, boosting demand.
- Corporate Earnings: Companies with good earnings reports and positive outlooks tend to see higher demand for their stock.
- Market Sentiment: Overall investor confidence can impact demand. Positive sentiment leads to buying, while negativity leads to selling.
Recent News:
- As of today, May 16, 2024, there seems to be softer demand in the US stock market [Business Standard, April 25, 2024].