As Inflation Ebbs, US Stocks Gain

The stock market rose early Wednesday morning after data showed that inflation was ebbing in the US, raising expectations of a shift in monetary policy by the Federal Reserve in the near future.

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Inflation rates dropped to 5.0 percent year-over-year last month from 6.0 percent in February, according to the Bureau of Labor Statistics, marking the smallest year-over-year increase since May 2021, after three years of rising.

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While the headline figure was positively impacted by the recession, analysts noted that inflation remains strongly above the Federal Reserve's 2-percent target. They also noted that after excluding food and energy prices, the report was considerably less impressive.

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The Dow Jones Industrial Average had reached 33,874.49 about 45 minutes into trading, a 0.6 percent gain compared with the previous day.

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In terms of broad-based equity performance, the broad S&P 500 index was up 0.5 percent at 4,129.39 and the tech-dominated Nasdaq Composite Index, which is worth $12,073.80, was up 0.4 percent.

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Patrick O'Hare, an analyst at Briefing.com, said the key takeaway from the report is that March was a month of disinflation rather than inflation.

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Despite the slightly higher core CPI, this does not necessarily rule out a rate hike by the Fed following the May meeting, and that is a positive sign, but it does feed a belief that the May hike could be the last hike in the Fed's tightening cycle, which has been ongoing since the last meeting of the Fed in December.

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Furthermore, the market is also anticipating the start of earnings season, which will commence at the end of this week with Delta Air Lines and JPMorgan Chase, as well as other financial institutions reporting their earnings.

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