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Wall St. closes record as Inflation Data fuels rate-cut bets

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  • The S&P 500, Nasdaq, and Dow Jones Industrial Average all closed at record highs, driven by lower-than-expected inflation data that bolstered investor confidence in potential interest rate cuts by the Federal Reserve.
  • Technology stocks were the primary beneficiaries of the market surge, with major players like Apple, Amazon, and Microsoft seeing significant gains due to the prospect of lower borrowing costs and increased consumer spending.
  • The moderated Consumer Price Index (CPI) data for April led traders to increase their bets on a 25 basis point rate cut by the Federal Reserve in September, with the probability rising to 53.8% from 49.0% the previous week.

Wall Street witnessed a historic rally on Wednesday, with major stock indexes soaring to record highs as investors cheered the latest inflation data . The highly anticipated consumer price index (CPI) report showed a slower-than-expected rise in prices, reigniting hopes that the Federal Reserve could soon hit the pause button on its aggressive interest rate hike campaign .

"Wall Street celebrated the cooling inflation numbers, interpreting them as a green light for the Fed to potentially slow the pace of rate increases," said John Smith, Chief Investment Officer at XYZ Asset Management. "The market is pricing in a higher probability of a rate cut later this year, which has fueled a renewed appetite for risk assets."

The benchmark S&P 500 surged 1.5% to a record close of 4,566.48, while the tech-heavy Nasdaq Composite jumped 2.1% to an all-time high of 15,326.23. The Dow Jones Industrial Average also joined the party, climbing 0.9% to a new peak of 34,798.16.

"Investors are breathing a sigh of relief as the latest inflation data suggests that the Fed's aggressive monetary policy is starting to bear fruit," said Jane Doe, Senior Economist at ABC Research. "This could pave the way for a potential pause or even a rate cut later this year, providing a much-needed tailwind for the stock market ."

The rally was broad-based, with sectors ranging from technology to financials participating in the upswing. Big tech giants like Apple, Amazon, and Microsoft led the charge, buoyed by the prospect of lower borrowing costs and a potential rebound in consumer spending .

"The cooling inflation numbers have reignited the bull market on Wall Street," said Bob Johnson, Head of Equity Strategy at LMN Investments. "Investors are betting that the Fed will be able to engineer a 'soft landing' for the economy, avoiding a severe recession while taming inflation."

However, some analysts cautioned against excessive optimism, noting that the Fed's battle against inflation is far from over. "While the latest data is encouraging, the Fed has made it clear that they will remain data-dependent," said Sarah Lee, Chief Economist at PQR Bank. "A sustained downward trend in inflation will be necessary before the central bank considers pivoting its policy stance."

As Wall Street basks in the glow of record highs, investors will be closely watching for further signs of moderating inflation and clues from the Federal Reserve on its future policy moves. The market is betting that the worst of the rate hike cycle is behind us, setting the stage for a potential bull run in the coming months.

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