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(Reuters) – Wall Street’s main indexes were poised for a higher open on Wednesday as headline consumer prices cooled faster than expected in March, raising hopes that the Federal Reserve could hit pause on its interest rate hiking cycle soon.
The Labor Department data showed headline and core CPI in March rose 0.1% and 0.4%, respectively, on a month-on-month basis. Economists were expecting a rise of 0.2% and 0.4%, respectively.
On a year-over-year basis, the headline number rose 5% against economists’ estimates of a 5.2% rise, while the core measure, which strips out volatile food and energy prices, climbed 5.6% in-line with consensus estimates.
“We are finally starting to see the cumulative effects of the relentless rate hikes,” said Peter Andersen, founder at Andersen Capital Management.
After a banking turmoil last month, investors are betting that the Fed will soon end its aggressive monetary tightening campaign and also start cutting rates in the back half of the year amid growing concerns of a recession.
Traders now see a 67% chance of a 25-basis point rate hike in May by the Fed, down from 73% before the release of the data.
Major technology and other growth stocks such as Apple Inc (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) Inc, Tesla (NASDAQ:TSLA) Inc and Meta Platforms Inc (NASDAQ:META) reversed early losses and jumped between 0.7% and 2.1% in premarket trade, helped by a fall in U.S. Treasury yields.
US inflation, Fed rates and markets, https://fingfx.thomsonreuters.com/gfx/mkt/zgpobjnzyvd/Pasted%20image%201681292009856.png
Minutes from the U.S. central bank’s policy meeting in March will also be watched closely by investors later in the day for further clues on the trajectory of interest rates. The Fed raised rates by 25 bps last month and signaled it was on the verge of pausing further rate hikes.
Also in focus will be remarks from Fed officials.
Minneapolis Fed President Neel Kashkari said on Tuesday that allowing inflation to stay high would be even worse for the labor market, while Chicago Fed President Austan Goolsbee said the U.S. central bank should be cautious about raising interest rates in the face of recent banking stress.
Beyond CPI, investors are awaiting the first-quarter earnings season, which begins in earnest on Friday with results from three major banks, Citigroup Inc (NYSE:C), JPMorgan Chase & Co (NYSE:JPM) and Wells Fargo (NYSE:WFC) & Co.
At 8:43 a.m. ET, Dow e-minis were up 220 points, or 0.65%, S&P 500 e-minis were up 33 points, or 0.80%, and Nasdaq 100 e-minis were up 130 points, or 0.99%.
Among stocks, American Airlines (NASDAQ:AAL) Group Inc dropped 1.9% after forecasting first-quarter earnings below analyst estimates.
U.S.-listed shares of Chinese firms Alibaba (NYSE:BABA) Group Holding Ltd, Baidu Inc (NASDAQ:BIDU) and JD (NASDAQ:JD).com Inc slipped over 1% each as investors weighed rising geopolitical tensions.
Taiwan said on Wednesday it had successfully urged China to drastically cut its plan to close airspace north of the island, averting wider travel disruption in a period of high tension in the region due to China’s military exercises.
