Wall St up as inflation data soothes rate-hike jitters

US stock indexes are higher after data showed consumer prices cooled faster than expected in March, raising hopes that the Federal Reserve could hit pause on its interest rate hiking cycle soon.

The Labor Department data showed headline and core CPI in March rose 0.1 per cent and 0.4 per cent respectively on a month-on-month basis.

Economists were expecting a rise of 0.2 per cent and 0.4 per cent respectively.

On a year-over-year basis, the headline number rose 5.0 per cent against economists’ estimates of a 5.2 per cent rise while the core measure, which strips out volatile food and energy prices, climbed 5.6 per cent in-line with consensus estimates.

“Today’s CPI takes some heat off the Fed, for now. Moderating price pressures combined with signs of cooling in the labour market will offer a temporary reprieve to markets,” said Ronald Temple, chief market strategist at Lazard.

“While this is good news, it does not mean tightening is over. Core inflation remains far above the Fed’s target, and the path to 2.0 per cent will be bumpy.”

Stubbornly high rents kept underlying inflation pressures simmering, likely ensuring that the US central bank will raise interest rates again next month.

Traders mostly stuck to bets that the Fed will hike rates by 25 basis points next month, with Fed fund futures pricing in a 70 per cent chance of such a move.

After the banking turmoil last month, investors were betting that the Fed will soon end its aggressive monetary tightening campaign and also start cutting rates in the back half of the year amid growing concerns of a recession.

Major technology and other growth stocks such as Microsoft Corp, Tesla Inc and Apple Inc edged higher as Treasury yields slipped.

Minutes from the US central bank’s policy meeting in March will also be watched closely by investors later in the day for further clues on the trajectory of interest rates.

The Fed raised rates by 25 bps last month and signalled it was on the verge of pausing further rate hikes.

Investors are also awaiting the first-quarter earnings season, which begins in earnest on Friday with results from three major banks, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.

In early trading, the Dow Jones Industrial Average was up 155.96 points, or 0.46 per cent, at 33,840.75, the S&P 500 was up 13.20 points, or 0.32 per cent, at 4,122.14, and the Nasdaq Composite was up 9.36 points, or 0.08 per cent, at 12,041.24.

American Airlines Group Inc dropped 7.1 per cent as it forecast a lower than expected profit for the first quarter as the carrier battles high fuel costs.

The wider airlines index fell nearly 4.0 per cent.

US-listed shares of Chinese firms Alibaba Group Holding Ltd and JD.com Inc fell almost 4.0 per cent each as investors weighed rising geopolitical tensions.

Taiwan said on Wednesday it had successfully urged China to drastically narrow its plan to close air space north of the island, averting wider travel disruption in a period of high tension in the region due to China’s military exercises.

Advancing issues outnumbered decliners for a 3.36-to-1 ratio on the NYSE and a 1.54-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and no new low while the Nasdaq recorded 45 new highs and 43 new lows.