Stock Market Today: Stocks surge after soft CPI report with Fed on deck

Stocks will test their recent closing highs with a key May inflation report and the Fed's June interest rate decision later in the session.

Jun 12, 2024 - 18:30

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Stock Market Today: Stocks surge after soft CPI report with Fed on deck

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U.S. equity futures powered higher Wednesday, while Treasury yields held steady, as investors picked through details of a key May inflation report just hours ahead of the Federal Reserve's June rate decision.

Updated at 8:45 AM EDT

Inflation shock

The Commerce Department's May inflation report showed the slowest monthly advance in four years, with a rate that was flat to April levels, and a headline rate of 3.3% that topped Street forecasts.

Stocks powered higher on the back of the release, which comes just hours ahead of the Fed's June policy meeting, with the S&P 500 called 40 points higher and the Dow set for a 225 point advance.

Benchmark 10-year note yields fell 10 basis point to 4.293% while 2-year notes fell 13 basis to 4.685%.

The US Inflation Rate has now been above 3% for 38 consecutive months, the longest period of high inflation since the late 1980s/early 1990s.https://t.co/l5IYmkf6Ih pic.twitter.com/HpRXmI24aU— Charlie Bilello (@charliebilello) June 12, 2024

Stock Market Today

Markets aren't expecting any change in the Fed's benchmark lending rate, which sits at a two-decade high of 5.25% to 5.5%, when the central bank unveils its official statement at 2:00 pm Eastern time, but are focused instead on the new set of growth and inflation projections published by Fed officials each quarter.

The forecasts feed into the so-called Dot Plots, which are a summary of where officials see Fed rates over the coming year and beyond. The last set of Dots, published in March, pointed to three quarter point rate cuts this year.

A series of faster-than-expected inflation reports since then, alongside a robust labor market and an outperforming economy, will likely trigger an overhaul of those forecasts, with today's May CPI update having a heavy influence on the Fed's thinking.

Fed Chairman Jerome Powell and his colleagues will publish fresh growth and inflation forecasts alongside their June rate decision.
Elizabeth Frantz/Reuters

"We expect the longer run fed funds rate will be revised higher, along with the end-of-year rate as rates will likely remain higher for longer," said Jeffrey Roach, chief economist for LPL Financial in Charlotte.

"Inflation is cooling and the Fed should be in a position to begin their rate cutting cycle this year, although the magnitude and speed of cuts will continue to frustrate investors," he added.

Wall Street expects to see the headline reading hold at an annual rate of 3.4%, but ease notably, to 0.1%, when compared to April levels.

So-called core inflation, which strips out volatile food and energy prices, is likely to ease to 3.5% on the year and hold at 0.3% on the month.

Treasury yields are steady ahead of the 8:30 am Eastern time report, with benchmark 10-year note yields trading at 4.402% and 2-year notes pegged at 4.83%.

Stocks on Wall Street, which closed at a fresh record high last night, are set for a modestly firmer open heading into the CPI report and the early afternoon Fed rate decision, with futures tied to the S&P 500 suggest a 6 point advance.

Futures contracts tied to the Dow Jones Industrial Average, meanwhile, are priced for a 20 point gain while those linked to the Nasdaq suggest a 26 point bump.

Stocks on the move include Oracle (ORCL) , which surged 8.6% following a mixed set of fourth quarter earnings that were offset by a new cloud deal with Google (GOOG) and OpenAI.

Apple (AAPL) , which added around $180 billion in market value yesterday tied to the release of its new AI toolkit, and closed at a record high of $207.15 each, was marked 0.38% lower in premarket trading.

Broadcom (AVGO) were marked 1.6% higher ahead of the network equipment maker's second quarter earnings after the closing bell, with analysts looking for a bottom line of $10.84 per share on revenues of $12.03 billion.

More Wall Street Analysts:

In overseas markets, Europe's region-wide Stoxx 600 was marked 0.46% higher in Frankfurt, with Britain's FTSE 100 rising 0.69% in mid-day London trading.

Overnight in Asia, the Nikkei 225 slipped 0.66% in cautious trading ahead of today's CPI report and Fed rate decision, while the regional MSCI ex-Japan benchmark was up 0.24% into the close of trading.