Wall Street on the rise as inflation eases

Stocks climbed Tuesday after a cooler reading on inflation cemented Wall Street’s bet that the Federal Reserve will hold off on hiking interest rates this week.

The S&P 500 rose 30.08 points, or 0.7 percent, to 4,369.01, its highest level since April 2022. The Dow Jones Industrial Average gained 145.79, or 0.4 percent, to 34,212.12, while the Nasdaq composite rallied 111.40, or 0.8 percent, to 13,573.32.

The U.S. stock market has been on a roll amid hopes the economy can avoid a severe recession and inflation can fall enough for the Federal Reserve to ease off its rate increases. Tuesday’s report showed that food, fuel and other prices for consumers were 4 percent higher in May than a year earlier, the latest slowdown from inflation’s peak of 9.1 percent last summer.

The data pushed traders to immediately amp up bets for the Fed today to announce no change to interest rates. If it does, that would mark the first meeting in more than a year where it doesn’t hike rates.

The Fed has already pulled its benchmark short-term rate up to its highest level since 2007, which has slowed inflation but has also helped cause several U.S. bank failures and a contraction in the manufacturing industry.

Nvidia rallied 3.9 percent and was the strongest force pushing up the S&P 500, along with other technology stocks. Tech and other high-growth stocks are seen as some of the biggest beneficiaries of an ease up on rate hikes.

Nvidia has gotten an added boost from Wall Street’s recent frenzy around artificial intelligence, which has helped a select group of stocks soar to huge gains this year.

But unlike earlier this year, when a small cadre of stocks was responsible for most of the S&P 500’s gains, Tuesday’s climb was widespread, with 4 out of 5 stocks in the index rising.

Raw-material producers and industrial companies had some of the biggest gains in the S&P 500 amid hopes for a resilient economy. Miner FreeportMcMoRan rose 5.3 percent, and United Airlines climbed 3.7 percent, for example.

For all the optimism, though, much of Wall Street doesn’t believe the end has arrived for rate hikes. Many traders expect the Fed to resume raising rates in July, even if it holds steady this week.

Tuesday’s inflation report showed that overall inflation remains too high, as are price gains underneath the surface. The Fed prefers to look at inflation after stripping out food, fuel and housing costs, hoping to get a better view of where the trend is heading. Such “supercore” inflation is still above the Fed’s comfort level.