Wall Street traders fearing another disappointing inflation report got a degree of relief after the Federal Reserve’s favored price gauge was on spot with estimates.

Stocks closed at all-time highs as the personal consumption expenditures index added to bets the Fed will be able to cut rates as early as June. While the PCE remained above the central bank’s 2 per cent target — validating officials’ wait-and-see approach — the data helped allay concerns about a more significant inflation increase.

“For markets keenly focused on when the Fed will transition towards easing rates, this report will help restore confidence that it isn’t ‘if’ the Fed will begin to cut rates in 2024, but ‘when’,” said Quincy Krosby at LPL Financial.

The S&P 500 saw its 14th record this year — notching a fourth straight monthly win. The Nasdaq 100 climbed almost 1 per cent, with Nvidia Corp. leading gains in megacaps. In late hours, Dell Technologies Inc. posted sales that beat estimates. New York Community Bancorp took a US$2.4 billion hit to earnings as it identified weaknesses with its loan review process and wrote down the value of past deals. The lender named new leadership to navigate the turmoil. U.S. 10-year yields were little changed at 4.26 per cent. Bitcoin topped $61,000.

To Krishna Guha at Evercore, the PCE report contains “no new bad news” on the inflation dynamics, with June remaining a solid bet for the first rate cut. Jamie Cox at Harris Financial Group says concerns about a reacceleration in prices are “overblown”. And Chris Larkin at E*Trade from Morgan Stanley notes the data may ease some immediate doubts among traders who had begun to wonder if the Fed “would dig in its heels and keep rates higher for longer.”

Treasury yields retreated from near their highest levels of the year. The move was further aided by jobless claims data indicating labor-market softening — and by anticipation of bond-buying related to the turn of the month. 

Also, positioning indicators before Thursday’s data suggested that traders had exhausted their capacity for wagers on higher yields in the absence of new information.

Wall Street also continued to keep a close a eye on Fedspeak.

Fed Bank of San Francisco President Mary Daly said officials are ready to lower rates as needed — but emphasized no urgent need to cut given the strength of the economy. Her Atlanta counterpart Raphael Bostic reiterated it will probably be appropriate to begin easing policy this summer based on his outlook for inflation. Cleveland Fed Chief Loretta Mester said inflation data out Thursday showed that policymakers have more work to do.

Since the hot January consumer-price index data, “officials have generally balanced between acknowledging the heat as unwelcome news — but not overweighting one data point too much — especially given possible distortions,” according to Peter Williams at 22V Research.

“We still need to wait until next month’s CPI data to see if the inflationary jump we saw earlier this month was just a blip, or if it is in fact the beginning of a new inflationary trend,” said Chris Zaccarelli at Independent Advisor Alliance. “At least for today, it should be all systems go and buyers should re-emerge.”

To Michael Shaoul at Marketfield Asset Management, despite the relief that there wasn’t another upside surprise in inflation, it’s important to note that the “stickier” portions of Thursday’s data were “quite strong.”

Policymakers pay close attention to services inflation excluding housing and energy, which tends to be more “sticky.” That metric increased 0.6 per cent from a month ago, the most since March 2022. Costs for portfolio management — which climbed by the most in three years — and accommodation led the advance.

Corporate Highlights:

• Best Buy Co. struck a more upbeat tone about reversing a two-year slump amid soft demand for electronics and appliances.
• Salesforce Inc. gave a lackluster annual sales forecast, but investors were pleased by the company’s continued profitability, a first-ever dividend and an increase in share buybacks.
• C3.ai Inc. reported sales that suggested customers are responding positively to the software company’s new artificial intelligence-based apps.
• Snowflake Inc., a software maker, delivered a disappointing sales forecast and announced that Chief Executive Officer Frank Slootman is stepping down from the role.
• HP Inc. reported quarterly revenue that missed estimates, battered by the ongoing slump in personal computer sales.
• The U.S. Justice Department is scrutinizing the midair blowout last month of a Boeing Co. door plug on an Alaska Air flight, in a move that could expose the company to criminal prosecution, according to a person familiar with the matter.
• Bayer AG plans to add activist investor Jeffrey Ubben to its supervisory board in the latest shakeup at the troubled chemicals and drugs company before a much-anticipated capital markets event next week.
• Grifols SA shares fell the most ever after management said the Spanish plasma maker will generate less cash this year than investors were expecting, dealing a bigger blow to the stock than last month’s attack by a short seller.

Key Events This Week:

• China official PMI, Caixin manufacturing PMI, Friday
• Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Friday
• BOE chief economist Huw Pill speaks, Friday
• U.S. construction spending, ISM Manufacturing, University of Michigan consumer sentiment, Friday
• Fed’s Raphael Bostic and Mary Daly speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 0.9 per cent
• The Dow Jones Industrial Average rose 0.1 per cent
• The MSCI World index rose 0.3 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.3 per cent to $1.0808
• The British pound fell 0.3 per cent to $1.2624
• The Japanese yen rose 0.5 per cent to 149.91 per dollar

Cryptocurrencies

• Bitcoin rose 2.3 per cent to $61,956.87
• Ether rose 2.1 per cent to $3,391.7

Bonds

• The yield on 10-year Treasuries were little changed at 4.26 per cent
• Germany’s 10-year yield declined five basis points to 2.41 per cent
• Britain’s 10-year yield declined six basis points to 4.12 per cent

Commodities

• West Texas Intermediate crude fell 0.5 per cent to $78.17 a barrel
• Spot gold rose 0.5 per cent to $2,043.85 an ounce