Wall Street closed higher on Wednesday as softer-than-expected US inflation data and a strong start to the second-quarter earnings season lifted investor sentiment, easing concerns over further interest rate hikes.
The Dow Jones Industrial Average rose 150.91 points, or 0.29%, to 52,659.18, while the S&P 500 gained 28.83 points, or 0.38%, to 7,572.42. The Nasdaq Composite outperformed, climbing 162.22 points, or 0.62%, to 26,269.23.
Investor confidence was supported by the latest Producer Price Index (PPI) report, which unexpectedly declined in June, following Tuesday’s softer Consumer Price Index (CPI) reading. The back-to-back inflation reports reinforced expectations that price pressures may be easing despite ongoing geopolitical tensions in the Middle East.
The data also reduced expectations of an imminent Federal Reserve rate hike. According to CME’s FedWatch Tool, markets are now pricing in just a 10.2% chance of a 25-basis-point rate increase at the central bank’s July meeting, down sharply from 31% a week earlier.
The earnings season also got off to a solid start, with BlackRock and Morgan Stanley both reporting quarterly profits that exceeded market expectations. BlackRock shares jumped 6.6%, while Morgan Stanley edged 0.4% higher.
Meanwhile, PayPal Holdings surged 17.2% after Reuters reported that Stripe and private equity firm Advent International had jointly offered to acquire the payments company for US$60.50 per share, representing a premium of about 28% over its previous closing price.
Among the S&P 500’s 11 sectors, communication services led the gains, while utilities posted the weakest performance.
Despite the positive inflation data, investors remain cautious as escalating military tensions involving the US and Iran continue to cloud the outlook for energy prices and inflation in the months ahead.
