S&P 500 Gains Ground Following CPI Report and Fed Rate Cut Expectations

On Wednesday, the S&P 500 experienced an upward trend as the technology sector resumed its rally, propelled by inflation data that reinforced expectations for a Federal Reserve interest rate cut scheduled for next week.

As of 1:05 p.m. ET (18:05 GMT), the S&P 500 had increased by 74 points, which is equivalent to 0.2%. The broader index also recorded a gain of 0.9%, while the tech-heavy Nasdaq composite rose by 1.7%.

In-line CPI Data Strengthens Rate Cut Expectations

The Labor Department reported that the Consumer Price Index (CPI) rose by 2.7% last month, marking a slight acceleration from the 2.6% increase in October. Furthermore, the core CPI, which excludes more fluctuating categories such as food and energy, increased by 3.3% year-over-year, aligning with market predictions.

According to Morgan Stanley in a recent analysis, the unexpected aspect of the November report came from the core services sector, where both rent and Owner's Equivalent Rent (OER) showed a monthly deceleration of 0.21% and 0.23% respectively. They noted, "In our view, this is a favorable report for the Fed," supporting the likelihood of a 25 basis points rate cut during the Federal Open Market Committee meeting scheduled for December 17-18.

Traders are increasingly optimistic, with about 98% now anticipating a rate cut next week, which is an increase from 92% just one day earlier, according to recent data from Investing.com.

Technology Sector Sees Renewed Rally

The technology sector showed signs of recovery, contributing to a rise in the overall market. Key players like Alphabet and NVIDIA Corporation were at the forefront of this resurgence.

Shares of Alphabet surged by more than 5%, building on prior gains after the company announced a significant advancement in quantum computing technology, which is expected to substantially enhance computing speeds.

Ridghetti Computing, known for manufacturing quantum integrated circuits, also benefited from this uptick, with its stocks climbing by 7%, adding to a remarkable 45% increase from the previous day.

Meanwhile, Broadcom Inc. surged over 5% due to reports suggesting that the chipmaker is collaborating with Apple to develop a new AI chip, according to a report by The Information.

Tesla Inc. also saw a 3% increase, reaching a new record high. The electric vehicle manufacturer’s shares have spiked by 64% since the election of Donald Trump, fueled by speculation that CEO Elon Musk's proximity to the president-elect would offer advantages for Tesla.

In the corporate earnings landscape, Adobe Systems is scheduled to announce its quarterly results after the market closes.

Challenges for Retail Sector

Retail stocks faced challenges as Macy’s shared disappointing guidance, leading to a 4% drop in its stock price after reducing its annual profit forecast amid weak holiday demand.

Additionally, shares of Dave & Buster's Entertainment suffered a major setback, plummeting 16% following the announcement of CEO Chris Morris's exit along with disappointing third-quarter financial results.

(Reporting contributed by Peter Nurse and Ambar Warrick.)

S&P500, CPI, FederalReserve, Technology, Retail