Stock Market News for May 11, 2023

·4 min read

U.S. stocks closed mostly higher on Wednesday, led by a tech rally after data showed that April’s consumer price index cooled to its lowest annual rate in nearly two years. However, core inflation remained elevated. The S&P 500 and Nasdaq ended in positive territory but the Dow closed dropped marginally to close in the red.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell less than 0.1% or 30.48 points to close at 33,531.33 points. 

The S&P 500 rose 0.5% or 18.47 points to finish at 4,137.64 points. Tech, utilities and real estate stocks were the biggest gainers.

The Utilities Select Sector SPDR (XLU) and Real Estate Select Sector SPDR (XLRE) each gained 0.9%. The Technology Select Sector SPDR (XLK) added 1.2%. Seven of the 11 sectors of the benchmark index ended in positive territory.

The tech-heavy Nasdaq climbed 1% or 126.89 points to end at 12,306.44 points.

The fear-gauge CBOE Volatility Index (VIX) was down 4.35% to 16.94. Advancers outnumbered decliners on the NYSE by a 1.32-to-1 ratio. On Nasdaq, a 1.40-to-1 ratio favored advancing issues. A total of 11.04 billion shares were traded on Wednesday, higher than the last 20-session average of 10.7 billion.

Stocks Rally on April CPI Data

Stocks struggled for direction on the first two days of the week, as investors awaited the consumer price index (CPI) reading for April. Fresh data released on Wednesday showed consumer prices in April climbed 0.4%, up from March’s increase of 0.1%. However, year-over-year CPI rose 4.9%, down from the 5% recorded in March. This is the lowest annual rate since April 2021, but it is still a lot higher than the Fed’s target level of 2%.

The year-over-year CPI reading was also better than economists’ expectations of a 5% rise. Core CPI remained elevated as it rose 0.4% in April for the second consecutive month and came in line with the consensus estimate. Year over year, core consumer inflation, excluding the volatile food and energy costs, rose 5.5% in April, down from 5.6% in March.

Investors’ confidence got a boost after the year-over-year consumer inflation figure fell below the 5% level. This raised hopes that the Fed could pause its interest rate hikes in its June meeting.

April’s reading also made investors hopeful that the central bank may go for a rate cut in the coming months. Following the release of the report, treasury yields tumbled, giving a boost to stocks. The 2-year Treasury yield dropped nearly 11 basis points to 3.91%, while the 10-year Treasury Yield fell 8 basis points to 3.44%.

As a result, tech stocks rallied. Shares of Apple, Inc. (AAPL) and Netflix, Inc. (NFLX) each rose 1%. Apple has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

However, inflation is still a lot higher compared to the Fed’s 2% target. The overall gains in the market were pared as cyclical stocks, which are closely linked to the economy, were down. Shares of Caterpillar, Inc. (CAT) declined 0.2%.

Investors also digested another batch of quarterly reports from some big players on Wednesday. Corporate earnings so far have been better than expectations, which has further raised hopes of the Fed going for a pause in its rate hikes. On Wednesday, The Wendy's Company (WEN) reported its quarterly results.

The company’s shares rose 1% after it reported quarterly earnings of $0.21 per share, beating the Zacks Consensus Estimate of $0.20 per share.

Roblox Corporation’s (RBLX) shares jumped 7.4% despite the company missing earnings estimates. Roblox reported first-quarter 2023 loss of $0.44 per share, wider than the Zacks Consensus Estimate of a loss of $0.42 per share.

No other major economic data was released on Wednesday. Investors are now waiting for the producer price index readings for April, which are scheduled to be out on Thursday.

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