The Nasdaq 100 index has staved off its recent losing streak and is up 1.77% on the day. Gains in the asset have accelerated with the latest headline and core US Consumer Price Index (CPI) data releases.
Data from the US Bureau of Labor Statistics indicates that US consumer inflation rose 8.5% in March on an annualized basis consensus of 8.4%), while meeting the 1.2% month-over-month estimate. Core CPI dropped from 0.5% a month earlier to 0.3%, which was below the market estimates of 0.5%. The surge in the headline inflation number reflects higher food costs and runaway energy prices, which are currently at highs last seen in December 1981.
The stock markets were expecting the impact of stratospheric food and energy prices, and this was largely priced in. Instead, the focus was on the core number, which discounts food and energy prices. With the core CPI figure dropping below the previous/consensus figures, the expectation is that the Fed may slow down on its tightening program.
The selloff in the long-term US bonds market is also helping to accelerate gains in the stock market. The US 10-year bond instrument is down 2.66% on the day, snapping a 7-day winning streak. This is promoting investment flows into the riskier equities markets following the boost the lower core CPI has given to bullish sentiment in the stock market. The core CPI’s drop is responsible for the 1.83% uptick in the Nasdaq 100 index.