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Nasdaq, S&P 500 Reach Record Highs On Tamer-Than-Expected Inflation Data

After ending yesterday’s choppy session mostly higher, stocks have seen further upside during trading on Wednesday. The major averages have all climbed firmly into positive territory, with the Nasdaq and the S&P 500 reaching new record intraday highs.

Currently, the major averages are just off their highs of the session. The Nasdaq is up 161.60 points or 1.0 percent at 16,672.78, the S&P 500 is up 45.61 points or 0.9 percent at 5,292.29 and the Dow is up 278.65 points or 0.7 percent at 39,836.76.

The continued strength on Wall Street comes following the release of a highly anticipated Labor Department report showing consumer prices in the U.S. rose by slightly less than expected in the month of April.

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The Labor Department said its consumer price index increased by 0.3 percent in April after rising by 0.4 percent in March. Economists had expected consumer prices to climb by another 0.4 percent.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in April after climbing by 0.4 percent in March. The increase in core prices matched economist estimates.

The report also said the annual rate of consumer price growth slowed to 3.4 percent in April from 3.5 percent in March, in line with expectations.

The annual rate of core consumer price growth decelerated to 3.6 percent in April from 3.8 percent in March. The slowdown also matched estimates.

Following yesterday’s hotter-than-expected producer price inflation data, the report has added to recently renewed optimism about the outlook for interest rates.

“The CPI print offered a modicum of hope that inflation is cooling, albeit slowly,” said Quincy Krosby, Chief Global Strategist for LPL Financial.

She added, “The Fed will certainly need a series of cooler reports for adjusting its rate easing timetable, but the CPI report suggests that the path towards 2% is a bit less bumpy.”

Meanwhile, the Commerce Department released a separate report showing retail sales in the U.S. unexpectedly came in flat in the month of April.

The Commerce Department said retail sales were virtually unchanged in April after climbing by a downwardly revised 0.6 percent in March.

Economists had expected retail sales to rise by 0.4 percent compared to the 0.7 percent increase originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales edged up by 0.2 percent in April after jumping by 0.9 percent in March. The uptick matched economist estimates.

Sector News

Computer hardware stocks have shown a substantial move to the upside on the day, driving the NYSE Arca Computer Hardware Index up by 2.9 percent to a record intraday high.

Shares of Dell (DELL) have surged after Morgan Stanley raised its price target on the computer maker’s stock to $152 from $128, calling it the “best way to play” the AI infrastructure build-out.

Significant strength is also visible among housing stocks, as reflected by the 2.8 percent surge by the Philadelphia Housing Sector Index.

The index has reached its best intraday level in over a month even though a report from the National Association of Home Builders showed an unexpected slump by homebuilder confidence in May.

Gold stocks have also moved sharply higher along with the price of the precious metal, with the NYSE Arca Gold Bugs Index jumping by 1.8 percent to a one-year high.

Semiconductor, commercial real estate and software stocks, while airline stocks are among the few groups bucking the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region once again ended mixed on Wednesday, with markets in Hong Kong and South Korea closed for holidays.

Japan’s Nikkei 225 Index inched up by 0.1 percent and Australia’s S&P/ASX 200 Index rose by 0.4 percent, while China’s Shanghai Composite Index slid by 0.8 percent.

Meanwhile, the major European markets have all moved to the upside on the day. While the German DAX Index has advanced by 0.8 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 0.2 percent.

In the bond market, treasuries have moved notably higher in reaction to the consumer price inflation data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8.4 basis points at 4.361 percent.

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