More market records amid tech surge

Inflation worse than expected, but Fed rate cut hopes remain

NEW YORK — U.S. stocks rallied to records Tuesday, led again by technology companies, as some of Wall Street’s most influential got back in their groove.

The S&P 500 jumped

1.1 percent to top its all-time high set last week. The Dow Jones Industrial Average climbed 235 points, or

0.6 percent, and the Nasdaq composite jumped 1.5 percent.

All three indexes began the day with losses after a report on inflation said U.S. consumers paid prices that were a bit higher last month than economists expected. The worse-than-expected data kept the door closed on hopes that the Federal Reserve could deliver cuts to interest rates at its meeting next week.

But the inflation figures were still close to expectations, and traders held onto hopes that the longer-term trend downward means the Fed will start the hoped-for cuts in June. That helped stock indexes to reverse their losses as the day progressed.

Plus, inflation may not be as hot in reality as the morning’s report suggested.

“January and February are notoriously noisy months for a lot of economic data,” said Brian Jacobsen, chief economist at Annex Wealth Management.

“The Fed wasn’t planning on cutting rates next week, and this report doesn’t change that. The discussion around the table will be more about the longer-term trend.”

The fear is “sticky” inflation that refuses to go down will force the Fed to keep interest rates high, which grinds down on the economy and investment prices. The Fed’s main interest rate is at its highest level since 2001.

“Another hotter-than-expected CPI reading may breathe new life into the sticky inflation narrative, but whether it actually delays rate cuts is a different story,” said Chris Larkin, managing director, trading and investing, at E-trade from Morgan Stanley.

For months, traders on Wall Street have been trying to get ahead of the Federal Reserve and guess when cuts to rates will arrive.

Through it all, the Fed has remained “nothing if not consistent in doing what it said it would do,” Larkin said. “Until they say otherwise, their plan is to cut rates in the second half of the year.”

In the bond market, Treasury yields dropped and then swung higher. The yield on the 10-year Treasury rose to 4.15 percent from 4.10 percent late Monday.