The report has boosted expectations for the Federal Reserve to cut interest rates this year
US stocks jumped to record highs amid signs of slowing inflation on a monthly basis in April. All three major stock indexes finished at their highest-ever levels for the first time in nearly two months. The Dow Jones finished up 0.9% to surpass its prior record closing high reached on March 28. The S&P 500 closed up 1.2%, while the Nasdaq Composite ended up by 1.4%, above its prior record closing high, which was hit during the previous session. For the week so far, the S&P 500 is up 1.6%, the Dow gains 1%, and the Nasdaq is up 2.5%.
The CPI rose 0.3% over the previous month and 3.4% over the prior year in April. Core inflation also cooled, boosting expectations for the Federal Reserve to cut interest rates this year. After the report, around 70% of traders expect at least one cut by the September meeting. That optimism has added to bullishness in the market.
A weaker-than-expected inflation reading led the 10-year Treasury yield to fall to its lowest level in a month, pressuring the dollar as well. The USD index dipped to five-week lows around 104.20 to lose around 0.7% on a daily closing basis. Before the report, the greenback was clinging to the 105.00 figure that has now turned back into resistance. Should the pressure persist in the near term, the dollar may challenge the 104.00 support zone. However, it looks like the selling interest could abate for the time being, with the USD trying to bounce on Thursday.
Elsewhere, gold prices rallied on Wednesday for the second day in a row to reach nearly one-month highs just below the $2,400 figure that capped the bullish tone. The XAUUSD pair extended gains to $2,396 during the session, looking ready to extend the ascent despite positive risk sentiment. The precious metal derives support from a weaker dollar and rising Fed rate cut expectations. In a wider picture, gold is back in the area of all-time highs seen last month around $2,450. On Thursday, the bullion briefly derailed the $2,400 zone before retreating marginally.
