Stocks Climb as Inflation Continues to Cool

Wall Street stocks entered more bull market territory in early trading on Tuesday and rallied on new data suggesting inflation continues to slow.

May’s consumer price index was initially read by investors as mild enough to keep the US Federal Reserve from raising interest rates further this week. The central bank is expected to announce its decision on Wednesday.

The S&P 500 rose 0.6% in early-morning trading, its highest level since January 2022 and the strongest rally since the index hit an October low. The S&P 500 Index is up more than 20% from its 2022 lows, breaking the bull market criteria by many definitions and signaling a new phase of market boom.

Investors and economists believe that slowing inflation is pushing up borrowing costs for consumers and businesses, weighing down the stock market as a whole, limiting the Fed’s need to keep raising interest rates. I believe there is. Some policy makers have already hinted that the Fed may not raise rates again this month, and the latest inflation numbers have all but eliminated the chances of a rate hike.

Not all investors agree on how best to define a bull market, especially when concerns remain about the long-term trajectory of the US economy. The S&P 500 is still about 9% off the all-time high it hit in early 2022, just before fears of rising interest rates as inflation accelerated kicked in and sent the index down about 20%.

“Inflation remains high and we expect the business cycle to eventually end in recession,” said Alexandra Wilson Elizondo, deputy chief investment officer of multi-asset solutions at Goldman Sachs Asset Management. I am doing,” he said.

Still, investor frenzy is spreading. The Russell 2000 index, which tracks U.S. small and medium-sized businesses with the biggest impact on the domestic economy, rose more than 8% this month and more than 1% on inflation reports.

The index has been flat for much of this year, and even after rising, it’s still hovering 15% above its low 12 months ago.

However, the recent rally in the Russell 2000 still suggests that stock gains are taking hold across the stock market as inflation subsides and the economy remains resilient to the potential negative impact of rising interest rates. showing.

“We are just over two weeks away from the start of the third quarter, which makes sense because earlier this year there was a near unanimous view that it was time for a recession to begin,” said Ms Wilson Elizondo. . “Today there is no recession.”

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