The U.S. stock market appears to be relatively stable today as investors consider the latest inflation report, which was in line with expectations. The crucial question now is when Wall Street can anticipate a decrease in interest rates. Currently, the S&P 500 remains largely unchanged, the Dow Jones Industrial Average has risen by 0.1%, and the Nasdaq composite has decreased by 0.2%.
Notably, Gap has experienced a significant 20.6% surge following stronger-than-expected profits and revenue in the latest quarter, defying analyst predictions. Despite acknowledging an uncertain economic outlook, the retail giant, which owns Old Navy and Banana Republic, reported growth across its brands and raised sales and profitability forecasts for the year.
Conversely, Dell faced an 18.2% decline as concerns about its profit margins overshadowed meeting profit expectations for the quarter.
Trump Media & Technology Group initially saw a surge in trading but ultimately closed with a 5.8% drop on its trading debut following Donald Trump’s conviction on 34 felony charges the day before. The company, operating the Truth Social platform, had previously warned of potential negative impacts from Trump’s conviction.
The recent increase in Treasury yields has signaled a potential losing week for the S&P 500, following six consecutive weeks of gains. However, with the release of the latest inflation report, which indicated a 2.7% inflation rate last month as forecasted, yields have slightly relaxed and certain underlying indicators have shown improvement.
This is positive news for investors awaiting a signal for the Federal Reserve to reduce its main interest rate. The expectation is that the Fed can make necessary adjustments at the most opportune moment and by the appropriate amount to balance economic growth and inflation.
The report also reveals weakened consumer spending growth and income growth last month, prompting economists to advise businesses to reconsider their approach in an environment with potentially reduced consumer expenditure compared to the previous year.
After the report, the 10-year Treasury yield decreased to 4.49% from 4.55% the day before, having previously peaked above 4.60%. The two-year Treasury yield, closely linked to Fed action expectations, also declined.
As expected, the Federal Reserve is unlikely to make any changes to interest rates at its upcoming meeting in less than two weeks. However, there is an 83% likelihood, according to traders, of at least one cut before the year ends.
In other market developments, Ulta Beauty recorded a 1.2% increase after surpassing profit and revenue expectations for the latest quarter, while Nordstrom fluctuated between losses and gains following a worse-than-expected loss. MongoDB saw a 25% drop despite exceeding profit and revenue forecasts as its profit forecasts fell short of analyst expectations.
Multiple Asian and European markets had mixed performance, with Tokyo’s Nikkei 225 rising by 1.1% and Hong Kong’s Hang Seng falling by 0.8%.
It appears that traders and investors will have to wait a bit longer to assess how the stock market will respond to the inflation report. The next Federal Reserve meeting will undoubtedly be a significant event to monitor.