Tech-Led Rebound Lifts Markets Following Mixed Inflation Data

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Tech stocks led the market rebound on Thursday, driven by a more favorable-than-expected reading on producer prices, which alleviated concerns raised by Wednesday’s unexpected increase in consumer prices.

The Dow Jones Industrial Average hovered slightly above the flatline, while the S&P 500 climbed 0.6%, recovering from a previous decline of about 1%. The Nasdaq Composite , heavily weighted towards technology companies, surged approximately 1.2%.

Meanwhile, the 10-year Treasury yield stabilized around 4.57%, after reaching its highest level since November during the previous session.

In March, the Producer Price Index rose by 0.2% compared to the previous month, a slower growth rate than economists had anticipated. The year-over-year increase of 2.1% also fell short of expectations. However, this annual growth marked the sharpest rise in producer prices in almost a year.

Investor sentiment had been dampened by a hotter-than-expected March Consumer Price Index report, prompting a reassessment of Federal Reserve policy expectations. The market is now anticipating only two rate cuts in 2024, later in the year than previously projected. Some analysts even speculate that no rate cuts, or possibly even a hike, could be on the table depending on economic data trends.

Overseas, the European Central Bank maintained its record high rates but hinted at impending rate cuts.

Meanwhile, escalating tensions in the Middle East, with concerns about potential Iranian forces’ attacks on Israel, pushed oil prices higher. Although crude futures retreated slightly, they remained near six-month highs, with West Texas Intermediate  trading just below $86 per barrel, while Brent crude remained above $90.

Despite these challenges, hopes remain high that first-quarter corporate earnings reports could provide a boost to stocks, with limited evidence suggesting that elevated borrowing costs are dampening earnings. Investors are eagerly awaiting quarterly updates from major U.S. banks like JPMorgan Chase & Co. (NYSE:JPM), set to kick off the earnings season in earnest on Friday.

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