Today, Wall Street hit a record high as the S&P 500 and the Nasdaq surged to new peaks following lower than expected inflation data. The Dow Jones Industrial Average also saw significant gains. This positive movement was fueled by expectations that the Federal Reserve may cut rates in September. Tech giants such as Nvidia, Apple, and Microsoft all saw increases in their stock prices. Additionally, oil prices fell along with yields on the U.S. 10-year and 2-year Treasuries.
In April, the consumer price index rose 0.3%, slightly below expectations, while inflation increased by 3.4% on a 12-month basis. This data is the first this year that did not exceed expectations, leading to the possibility of a Fed rate cut later in the year. Despite this, inflation remains above the Fed’s 2% target. The meme stock rally that had been ongoing saw a decline as shares of GameStop and AMC fell over 18% each, indicating a potential end to the frenzy.
Warren Buffett’s Berkshire Hathaway revealed a $6.7 billion stake in Chubb, a Zurich-based insurer, in a regulatory filing. This purchase, previously kept secret, became the ninth-largest holding for Berkshire as of the end of March. In Asia, markets rose following Wall Street’s record highs, with Hong Kong’s Hang Seng and Japan’s Nikkei 225 both seeing gains. Tencent, a Chinese tech giant, also experienced an increase in stock price after reporting better-than-expected earnings.
As the Biden administration imposes tariffs on Chinese imports, analysts at Morgan Stanley have identified U.S. stocks that could benefit from the ongoing trade tensions between the U.S. and China. The current market sentiment suggests a high probability of a rate cut at the September Fed meeting, with expectations of further cuts throughout the year. Despite this, Fed Chair Jerome Powell has emphasized the need for patience, stating that inflation is falling slower than anticipated.
While some experts predict a rate cut as early as July, others believe the Fed will wait for more evidence before making a decision. Fed Chair Powell has stated that the central bank will maintain its current rates for a longer period. Despite the positive momentum in the markets, there is still uncertainty surrounding the timing of a rate cut and the overall economic outlook. Investors are advised to stay informed and monitor the situation closely for any further developments.
