CPI Data Triggers Changes in the Market! This Is What Happens In The Financial Markets


US stocks rose on Wednesday after the latest reading on inflation showed consumer prices rose less than expected in May. This latest survey of inflation comes hours before a highly anticipated Federal Reserve meeting that will provide the latest signal on the path of interest rates.

The S&P 500 rose more than 0.8%, building its 27th record close of the year. The tech-heavy Nasdaq Composite Index rose nearly 0.9%, also adding to the previous day's record close. The Dow Jones Industrial Average also jumped about 0.9%.

The Consumer Price Index (CPI) remained unchanged from the previous month and rose 3.3% from a year earlier in May, slowing from a 0.3% month-on-month increase in April and a 3.4% annual increase in prices. Both of these measures beat economists' expectations. In the "core", which strips out the more volatile food and gas costs, prices in May rose 0.2% from the previous month and 3.4% from a year earlier — cooler than the April data. Both of these measures are also better than economists' estimates.

This changed market expectations for a Fed rate cut this year. After this data was released, the market expected about a 69% chance the Federal Reserve would start cutting rates ahead of the September meeting, based on data from the CME FedWatch Tool. This data increased from about 53% a day earlier.

As a result, interest rate-sensitive markets soared. The Real Estate sector led the eleven sectors, rising more than 2%.

However, all that could change after the FOMC. The Fed's decision almost certainly means the central bank is expected to keep rates at their current 23-year high. Investors will be watching the release of the Fed's latest economic projections in the "dot plot" especially, how many rate cuts are expected for the rest of the year.

The US dollar index, which measures the US dollar against six major currencies, was traded down -1.17% to a trading level of 103.96.