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Inflation decelerated more than expected in May, bolstering investor optimism regarding the conclusion of Fed rate hikes.
NEW YORK — 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%, to 4,369.01, its highest level since April 2022. The Dow Jones Industrial Average gained 145.79, or 0.4%, to 34,212.12, while the Nasdaq composite rallied 111.40, or 0.8%, 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 Fed to ease off its rate increases. Tuesday’s report showed food, fuel and other prices for consumers were 4% higher in May than a year earlier, the latest slowdown from inflation’s peak of 9.1% last summer.
Traders immediately amped up bets for the Fed to announce no change to interest rates Wednesday. Still, many traders expect the Fed to resume raising rates in July.
Tuesday’s climb was widespread, with four out of five stocks in the index rising.
Traders work March 28 on the floor at the New York Stock Exchange.
Raw-material producers and industrial companies had some of the biggest gains amid hopes for a resilient economy. Miner Freeport-McMoRan rose 5.3%, and United Airlines climbed 3.7%, for example.
Nvidia rallied 3.9% 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 easing rate hikes.
Nvidia also got a boost from frenzy about artificial intelligence, which helped some stocks soar to huge gains this year.
The Fed already pulled its benchmark short-term rate up to its highest level since 2007, which slowed inflation but helped cause several U.S. bank failures and a contraction in the manufacturing industry.
Zions Bancorp. fell 1.6% after it appeared to cut its forecast for upcoming net interest income in an investor presentation.
Just two weeks remain until the start of the third quarter of the year. Many investors predicted a recession would hit in the third quarter, yet the job market remains resilient.
In the bond market, the yield on the 10-year Treasury rose to 3.83% from 3.74% late Monday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.69% from 4.58%.
Abroad, Hong Kong’s Hang Seng rose 0.6% after China’s central bank lowered its one-week lending rate for the first time since last summer.
Support from China, the world’s second-largest economy, helped push up the price of crude oil. A barrel of U.S. crude rose $2.30 to $69.42. Brent crude, the international standard, gained $2.45 to $74.29 per barrel.
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