GLOBAL MARKETS-Stocks gain, yields fall as US CPI rises less than expected

BY Reuters | ECONOMIC | 05/15/24 03:09 PM EDT

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Major U.S. stock indexes higher

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Dollar down after CPI report

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Oil futures settle higher

(Updates to 2:50 p.m. ET/1850 GMT)

By Caroline Valetkevitch

NEW YORK, May 15 (Reuters) - Global stock markets jumped while U.S. Treasury yields fell to five-week lows on Wednesday as data showed U.S. consumer prices rose less than expected in April, suggesting inflation has resumed a downward trend in the second quarter.

The U.S. dollar declined. The consumer price index report raised hopes among some investors that the Federal Reserve may cut interest rates in September.

The MSCI All-World share index rose to new record highs, while the Nasdaq was up more than 1% and leading gains in the U.S. stock market.

The U.S. Bureau of Labor Statistics said its consumer price index rose by 0.3% in April, below expectations for an increase of 0.4%, matching March's 0.4% gain, while on an annual basis, CPI was up 3.4%, in line with forecasts and below the previous month's 3.5% rate.

Separately, U.S. government data showed retail sales rose 3.04% year on year in April, versus March's 4.02% increase, and were flat on a monthly basis.

Investors do not anticipate any rate hikes in 2024, but they have had to dial back expectations for rate cuts, given how sticky inflation is.

CPI "was a good report," said Oliver Pursche, senior vice president and adviser at Wealthspire Advisors in Westport, Connecticut.

"As we've been talking about, progress is being made on the inflation front, but it is uneven. So I don't think this changes the Fed's trajectory or plan, but it should give investors and consumers confidence that we're moving in the right direction," Pursche added.

On Tuesday, data showed U.S. producer prices increased more than expected in April, while Fed Chair Jerome Powell said the PPI data was "mixed" rather than "hot" because the prior month's data was revised lower.

The Dow Jones Industrial Average rose 264.82 points, or 0.67%, to 39,822.22, the S&P 500 gained 52.36 points, or 1.00%, to 5,299.04 and the Nasdaq Composite gained 210.01 points, or 1.27%, to 16,721.19.

MSCI's gauge of stocks across the globe rose 7.62 points, or 0.97%, to 793.50. The STOXX 600 index rose 0.59%.

U.S. Treasury yields fell to more than five-week lows after the CPI report.

Benchmark 10-year yields were last down 8.4 basis points on the day at 4.361% and got as low as 4.340%, the lowest since April 5.

The dollar fell broadly after the CPI report, with the euro rising to a one-month high of $1.0869.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.64% to 104.38, with the euro up 0.52% at $1.0873.

Against the Japanese yen, the dollar weakened 0.91% to 154.99.

U.S. crude gained 61 cents to settle at $78.63 a barrel and Brent rose 37 cents to settle at $82.75 per barrel.

(Additional reporting by Amanda Cooper and Ankur Banerjee; Editing by Bernadette Baum, Will Dunham and Jonathan Oatis)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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