Inflation Report: US Stocks Jump on Cool May CPI

• US stocks surged on Wednesday after inflation came in softer-than-expected.
• Prices remained flat for the month of May and rose just 3.3% year-per-year.
• Investors are hopeful the Fed could cut rates 3 times or more by the end of 2024.

US stocks jumped on Wednesday as traders took in a soft inflation report and revved up their hopes for Fed rate cuts by the end of the year. All three benchmark indexes ticked higher, with the Dow surging by over 200 points and the S&P 500 Nasdaq notched fresh record highs.

Inflation came in softer than expected, with consumer prices remaining flat over the month of May. On a yearly basis, inflation was up 3.3%. That’s slightly lower than the 3.4% yearly increase recorded in April, marking the second month in a row that prices have cooled.

Bond yields plunged after the report. The 10-year US Treasury dove 11 basis points to 4.287%

“Wednesday’s weaker-than-expected CPI will allow the Fed to start cutting interest rates as soon as September since we have now seen multiple encouraging inflation readings, after the concerning spike in inflation earlier this year,” Skyler Weinand, the chief investment officer of Regan Capital, said in a note. “There’s a clear path to a soft landing and the Fed may very well be coming to the market’s rescue in as little as three months.”

Investors are largely expecting the Fed to hold rates steady at the conclusion of its policy meeting Wednesday afternoon, but markets remain hopeful the central bank will loosen monetary policy by the end of the year. Fed fund futures show a 71% chance the Fed could cut rates three times or more by December, according to the CME FedWatch tool.

“Things are playing out as the Fed hoped, so Jerome Powell will probably be feeling good this afternoon,” David Russell, global head of market strategy at TradeStation, said in a statement. “The bears have nowhere to run to and nowhere to hide.”

Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Wednesday:

Here’s what else is going on today:

• West Texas Intermediate crude oil rose 1.49% to $79.06 a barrel. Brent crude, the international benchmark, was higher 1.43% to $83.09 a barrel.
• Gold ticked higher 0.94% to $2,338.43 per ounce.
• The 10-year Treasury yield dropped 11 basis points to 4.287%.
• Bitcoin surged 3.14% to $69,437.