Stocks rose Wednesday after new data raised hope that the Federal Reserve can bring down inflation without pushing the U.S. economy into a recession. The S&P 500 reached a new high for 2023.
The broad market index advanced 0.74% to end at 4,472.16. The Dow Jones Industrial Average traded 86.01 points higher, or 0.25%, to close at 34,347.43. The Nasdaq Composite popped 1.15% to 13,918.96. The S&P 500 and the Nasdaq closed at their highest levels since April 2022.
Bank stocks jumped on Wednesday. Citigroup and Goldman Sachs saw shares climb 1.8% and 1.7%, respectively. Regional banks also saw gains, with Comerica adding 3.1%, and Zions Bancorporation jumping 2.8%.
The consumer price index rose 3% on a year-over-year in June. Economists polled by Dow Jones expected a 3.1% increase. Month over month, the index rose 0.2% last month, also less than forecast. On top of that, core CPI — which strips out volatile food and energy prices — rose less than expected.
"I think it's a good report. Inflation is going the way that the Federal Reserve wants it to go. But I don't think we're ready to say that they're going to be able to cut rates," said Megan Horneman, chief investment officer at Verdence Capital Advisors.
"There's still three areas of the inflation that the Fed's looking at very closely — service inflation, wage inflation and housing inflation. All three of those things, while they are moderating, are still uncomfortably high," Horneman added.
June data for the producer price index — another well-watched gauge of inflation — is due Thursday before the bell.
Both price indexes are being watched for tea leaves on the path of inflation, which investors see as potential harbingers for how the central bank will move interest rates going forward. The market is pricing in an approximately 92% chance the Fed raises interest rates at the July meeting, according to CME's FedWatch Tool.
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Correction: Economists polled by Dow Jones expected CPI to rise 3.1% last month. A previous version misstated the estimate.