Stock market rises after CPI inflation rate falls in April

Inflation rates fell by a click in April, ending two consecutive months of rising inflation. The April Consumer Price Index (CPI) reported the 12-month inflation rate in April at 3.4%, down slightly from 3.5% in March. However, the inflation rate is still high compared to 3.2% in February.

Month-on-month, seasonally adjusted, inflation increased 0.3% in April, slightly lower than the 0.4% increase in March. Economists had expected a 0.4% increase in April, which was slightly lower than expected.

As a result, stocks opened higher on Wednesday with all major indexes rising.

Core inflation rate hits 3-year low

Core inflation, excluding volatile food and energy costs, fell to 3.6% in April from 3.8% in March. Last month’s core inflation rate was the lowest since April 2021.

Indexes for shelter, auto insurance, medical, clothing and personal care all rose in April. The used car and truck, furniture and operations, and new vehicle indices all declined last month.

Gasoline prices rose 2.8% in April but have risen only 1.2% over the past 12 months. Shelter costs increased 0.4% in April, with the 12-month inflation rate at 5.5%.

“The shelter index rose in April, as did the gasoline index. Together, these two indices contributed more than 70% of the monthly index increase for all categories,” a CPI press release said. “The energy index rose 1.1% last month. There was no change in the food index in April. “The home cooking index fell 0.2%, while the dining out index rose 0.3%.”

Over the past 12 months, food prices have risen 2.2%, while energy costs are currently up 3.1%. Electricity costs increased by 5.1%, and transportation service costs increased by 11.2%. Meanwhile, utility gas service prices fell 1.9%, and used car and truck prices fell 6.9%.

The lower CPI figure comes a day after it was revealed that the Producer Price Index rose slightly in April.

stock market moves higher

All major stock indices rose on Wednesday’s decent inflation report. The Russell 2000 that made the biggest move immediately after the market opened was up 1.1% on the day. The S&P 500 and Nasdaq Composite both rose 0.6%, while the Dow Jones Industrial Average rose 196 points, or 0.5%, shortly after the opening bell.

Although the inflation rate is higher than February levels, the downward trend is a positive sign as the Federal Reserve expects inflation to continue to decline toward its annual target of 2%. If that happens, the decline would be a signal for the central bank to consider cutting interest rates.

The next economic data release to watch is the Personal Consumption Expenditures (PCE) index, scheduled for release on May 31. The PCE index is the Federal Reserve’s preferred measure of inflation. In March, it rose 2.8% compared to the same period last year.