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The Nasdaq hit a new all-time high on Tuesday amid the close, while the S&P 500 and Dow also posted gains as comments from Federal Reserve Chairman Jerome Powell reassured investors ahead of a major consumer inflation report expected on Wednesday.
Producer prices in the US rose more than expected in April, especially due to significant increases in prices for services and goods, which forced investors to reconsider expectations for a reduction in interest rates in September.
However, speaking on Tuesday, Powell characterized the latest PPI data as mixed rather than an indication that the economy is warming, taking into account downward revisions to data from the previous period as well.
Powell's comment that he doesn't expect any near-term interest rate hikes despite recent data on high inflation also added to investor optimism.
"The market is now more confident in high rates over the long term. Much of the discussion has centered on the possibility of rate hikes, and Powell emphasized that this is not currently on the table," said Lindsey Bell, chief strategist at Charlotte, North Carolina-based 248 Ventures. She also noted that the rise in stocks was observed against the backdrop of falling Treasury yields.
"The bond market seems to be adapting and the stock market is responding to the bond market," Bell added.
However, ahead of Wednesday, investors were cautiously awaiting consumer price index data to see whether the surprise growth recorded in the first quarter and April would continue.
Persistent inflation and a stable labor market have prompted a revision of expectations for the Federal Reserve's initial rate cut from March to September.
However, the stock market has posted strong gains this year on the back of strong, better-than-expected quarterly earnings and the prospect of a possible rate cut by the Federal Reserve.
While the tech-heavy Nasdaq index made a strong run to its record set on April 11, the S&P 500 ended the trading day 0.1% below its closing high on March 28. Likewise, the Dow Jones closed at less than 1% of its record high, also reached on March 28.
The Dow Jones Industrial Average rose 126.60 points, or 0.32%, to 39,558.11. The S&P 500 added 25.26 points, or 0.48%, to 5,246.68, while the Nasdaq Composite rose 122.94 points, or 0.75%, to 16,511.18.
Among the 11 key industrial sectors in the S&P index, consumer staples posted the biggest decline, losing 0.2%, while the technology sector led gains, adding 0.9%.
Alphabet (GOOGL.O) shares rose 0.7% after Google showed off innovations in its use of artificial intelligence, including an update to its Gemini chatbot and improvements to its search engine.
Home Depot (HD.N) shares closed down 0.1% after falling more than 2% on the day. The decline followed the retailer's quarterly report, which showed an unexpected decline in same-store sales as consumers switched to smaller home projects and cut spending on big-ticket items.
Alibaba's US-traded shares fell 6% after announcing an 86% drop in fourth-quarter profit.
Shares of athletic footwear maker On Holding jumped 18.3% after the company raised its full-year sales forecast ahead of quarterly expectations thanks to strong demand for its sneakers.
US President Joe Biden has announced steep tariff increases on imports of a range of Chinese goods, including electric vehicles, computer chips and medical products.
Shares of Chinese electric vehicle maker Li Auto, also listed in the U.S., fell more than 2%, while shares of Tesla (TSLA.O) rose more than 3%.
AMC Entertainment (AMC.N) shares soared nearly 32% to $6.85, while Koss Corp (KOSS.O) shares rose 40.7% to $6.15, among other stocks popular during the 2021 meme rally. year and shares in a short position.
On the New York Stock Exchange (NYSE), AMC and GameStop were the most actively traded stocks, with advancers outnumbering decliners 2.43 to 1, with 358 new highs and 31 new lows.
Asian stock markets were higher on Wednesday, while the US dollar weakened as investors digested mixed US producer price data and awaited a key consumer price report that could have a significant impact on the Federal Reserve's near-term monetary policy.
MSCI's broad index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.38% to hit a new 15-month high during the trading session. Japan's Nikkei (.N225) rose 0.58%.
The latest data showed U.S. producer prices rose more than expected in April, indicating persistent inflation at the start of the second quarter.
Shares of GameStop (GME.N) and AMC (AMC.N), popular among retail investors, jumped significantly after messages from Keith Gill, known as "Growling Kitten", leading to discussions about the possible return of a key figure of the 2021 meme rally.
In the Chinese market, stocks started the day lower, with the blue-chip index .CSI300 down 0.16% and the Hang Seng Index .HSI in Hong Kong down 0.22%.
US President Joe Biden announced significant tariff hikes on some Chinese imports, including electric vehicles, computer chips and medical products.
In currency markets, the dollar continued to slide as investors held back action ahead of consumer price index data, while the euro neared its one-month high, last trading at $1.0817.
The US Dollar Index, which measures the value of the US currency against a basket of six major currencies, was seen at 105.01. The yen traded at 156.36 per dollar, having hit a two-week low of 156.80 on Tuesday, raising fears of new currency interventions by Japanese regulators.
On April 29, the yen fell to a 34-year low of 160.245 per dollar, followed by aggressive yen buying that traders and analysts speculated was carried out by the Bank of Japan and the Japanese Ministry of Finance.
Commodity prices rose in response to the threat of major wildfires in Canada's oil sands and ahead of expected declines in U.S. crude oil and gasoline inventories later in the day.
The US WTI crude oil price rose 0.4% to $82.71 a barrel, while Brent crude rose 0.5% to $78.39 a barrel. The spot price of gold remained virtually unchanged at $2,356.79 per ounce.
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