WASHINGTON (Reuters) - Stocks edged up, oil prices recovered and bond yields fell on Wednesday after data showed U.S. consumer prices rose at a slightly slower-than-expected pace last month, evidence that the Federal Reserve was succeeding in its fight against inflation.
MSCI’s gauge of global equity performance rose 0.03% after the Labor Department’s Consumer Price Index (CPI) rose 4.9% year-over-year in April, against expectations of 5%.
The odds favoring a ‘pause’ in rate hikes in June sharply increased after the data, sending Dow e-minis up 78 points, or 0.23%, while S&P 500 e-minis rose 14.75 points having been down before the key data release.
“Markets are reacting positively, with a drop in short-term rates and a pick-up in equity futures,” said John Leiper, Chief Investment Officer at Titan Asset Management.
“Bigger picture, I think the market is hyper fixated on the ‘pause’ but a pause is still restrictive overall,” he said.
U.S. and Brent oil futures likewise turned positive having fallen as much as $1 in earlier trading, on concerns a rise in U.S. inventories showed weakening demand.
Economists had expected the headline CPI to hold steady at an annual 5% and core CPI to moderate very slightly to 5.5%, with anything stickier seen likely to confound bets interest rates will fall.
The dollar index hit a session low of 101.36 after the headline April inflation data, while benchmark 10-year German bond yields edged down 4 basis points.
The broad-based rally across asset classes showed investors relieved that the U.S. is making progress in the battle against inflation which has roiled markets worldwide this year.
Problems still loom in the world’s biggest economy however, with lawmakers at an impasse over the approaching U.S. debt ceiling.