Wall Street today: US stocks snap three-day losing streak, Treasury yields fall after inflation data; Tesla up 6%

Wall Street Today: Stocks Climb as US Treasury Yields Dip on Inflation Data

Stocks on the S&P 500 rose for the first time in three sessions, while US Treasury yields dipped as inflation data fueled expectations that the Federal Reserve’s preferred measure of prices might be cooler than anticipated.

Inflation Data

The Labor Department reported that the producer price index (PPI) for final demand rose 0.4% in January, beating the estimate of a 0.3% rise. This comes on the heels of Wednesday’s consumer price index (CPI) data, which showed its largest acceleration in nearly 1-1/2 years.

However, components of the PPI data that are part of the personal consumption expenditures (PCE), the Fed’s preferred targeted inflation measure, were soft, adding to hopes that the PCE reading may be cooler than currently expected.

Market Reaction

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Wall Street stocks were higher after the inflation data, with the Nasdaq up more than 1%. Consumer discretionary led all S&P sectors higher, lifted by a 6% rise in Tesla and a 14% surge in MGM Resorts after the casino operator reported better-than-expected quarterly earnings.

The Dow Jones Industrial Average rose 0.23%, the S&P 500 rose 0.56%, and the Nasdaq Composite rose 0.97%. MSCI’s gauge of global stocks rose 0.74%, on track for its biggest daily percentage gain since February 4.

Treasury Yields

U.S. Treasury yields fell 9.1 basis points to 4.543%, on track for its biggest daily drop in a month. The yield on benchmark 10-year notes fell 9.1 basis points to 4.543%, as investors adjusted their expectations for interest rates in light of the inflation data.

Currency Markets

The dollar index, which measures the greenback against a basket of currencies, fell 0.48% to 107.39, on track for its biggest one-day percentage drop since January 24. The euro rose 0.47% to $1.0431.

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Commodities

Oil prices fell on the potential for a deal between Russia and Ukraine, while rising crude inventories also exerted downward pressure. U.S. crude fell 0.49% to $71.02 a barrel, and Brent fell 0.57% to $74.76 per barrel.

Central Banks

The European Central Bank (ECB) could cut interest rates three more times this year even if the US Federal Reserve moves more slowly, according to Croatian policymaker Boris Vujcic. However, policy easing would be predicated on a rapid fall in underlying inflation.

Economic Indicators

The US initial jobless claims fell 7,000 to a seasonally adjusted 213,000, slightly below the 215,000 and indicating a stable job market. The data also showed that the US economy grew by 0.1% in the final quarter of last year, topping the estimate of a contraction of 0.1%.

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Key Quotes

• "It was a bit of relief to see the components that feed into PCE were better than expected. I was also pleased to see that the anticipation of tariffs isn’t showing up yet in the data." – Brian Jacobsen, Chief Economist at Annex Wealth Management
• "We could see those prices move up when we get the February data in March, but at least in January, businesses weren’t trying to front-run tariffs with their prices." – Brian Jacobsen, Chief Economist at Annex Wealth Management
• "The data comes on the heels of a strong December reading, and it’s possible that we’ve seen the worst of the inflation data behind us." – Karl Dehn, Economist at High Frequency Economics

Market Experts’ Analysis

• "The PPI data suggests that inflation is under control, and it’s a positive sign for the economy." – Brian Jacobsen, Chief Economist at Annex Wealth Management
• "The data doesn’t necessarily mean that the Fed won’t cut rates, but it does suggest that the economy is in a better place than previously thought." – Karl Dehn, Economist at High Frequency Economics

Summary

US stocks rose for the first time in three sessions, with the S&P 500, Dow Jones, and Nasdaq Composite all gaining. Treasury yields fell as inflation data fueled expectations that the Fed’s preferred measure of prices might be cooler than anticipated. The dollar index fell, while the euro rose. Oil prices dropped on the potential for a deal between Russia and Ukraine, and the European Central Bank could cut interest rates three more times this year, according to a top policymaker. The US economy grew by 0.1% in the final quarter of last year, topping the estimate of a contraction of 0.1%.

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