ETFs
Top ETFs Rise with April CPI
Inflation – Prices – Grocery products – Shopping cart
Major ETFs surged higher in morning trading after the Consumer Price Index (CPI), a key measure of inflation, came in slightly lower than expected for April.
The U.S. Commerce Department reported that the CPI rose 3.4% year-over-year and 0.3% from March. The core CPI, which excludes less volatile food and energy costs, was 3.6%.
Investors had viewed the latest report with optimism amid some signs that inflationary pressures were finally easing after a first quarter of surprisingly strong numbers. On Tuesday, although the producer price index – another closely watched indicator of inflation – rose more than expected in April, some of its components, including airfares, fell and the Commerce Department revised to the decline in its March figure. Last week, jobless claims, linked to rising prices, increased for the first time in weeks.
Factset’s median estimate, based on 11 separate forecasts, called for a CPI of 3.4%, up from 3.5%. in March and the first sequential decline since January.
Stocks rose following the report, with the S&P 500 climbing 0.6% and the tech-heavy Nasdaq 0.6%, pushing the tech-heavy index above its all-time high . The largest stock ETFs by assets under management, the SPDR S&P ETF Trust (SPY) And Vanguard 500 Index Fund (VOO) increased by 1%, while the Invesco Trust QQQ (QQQ) increased by 0.6%.
Bitcoin, gold, rise in TLT
Other risk assets also rose, with bitcoin climbing more than 4%.
Gold, a traditional safe-haven asset, which has soared over the past six months, climbed 0.6%, pushing the SPDR Gold Stock ETF (GLD) greater than 1%. The yield on the 10-year Treasury note also fell to 4.37%. THE iShares 20+ Year Treasury Bond ETF (TLT), a bond market proxy jumped more than 1%. The TLT rose more than 2% in May with net inflows of $550 million, partly due to expectations that the CPI would offer encouraging signs.
Learn more: TLT Investors Seek Redemption in the Face of CPI Inflation
The Fed will “keep the key rate where it is”
After cutting interest rates for 15 months, the US central bank appeared on track to meet its 2% annual inflation target, raising hopes that it could reverse its hawkish monetary policy. But as the CPI and other indicators have stagnated, the Federal Reserve has become increasingly cautious about cutting rates, leaving them intact since last July.
In announcing the central bank’s latest policy decision on May 1, the Fed reiterated its commitment to basing future decisions on data showing that inflation is “sustainably trending toward 2 percent.”
On Tuesday, speaking at an event in Amsterdam shortly after the latest PPI was released, Fed Chairman Jerome Powell said it was unlikely “based on the data we have, that the next measure… be a rate hike.”
The story continues
“I think it’s more likely that we’ll get to a point where we keep the policy rate where it is,” he said.
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