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Wall Street’s main indexes climbed on Tuesday after consumer prices in the world’s largest economy rose in line with expectations, bolstering bets of a smaller interest rate hike by the Federal Reserve at its next meeting.
Data showed that the US Consumer Price Index (CPI) rose 0.4% in February against 0.5% a month ago. On an annual basis, it rose 6.0% last month, compared to 6.4% in the previous month.
Excluding the volatile food and energy components, the CPI increased 0.5% after rising 0.4% in January. In the 12 months to February, the so-called core CPI gained 5.5% after advancing 5.6% in January.
Traders held on to bets of a 25-basis-point rate hike at the Fed’s next meeting in March, with odds of a pause in hikes slipping slightly to 17%.
Stocks have been hammered in the past few days following the collapse of SVB Financial Group and peer Signature Bank and on fears of risks to other banks from sudden interest rate hikes by the Fed.
Investors are hoping that the threat of a financial crisis will force the US central bank to ease monetary tightening.
“In light of the weekend’s events, I don’t think it could have been a more perfect number. It shows that inflation is trending the way the Fed has expected and wanted,” said Kim Forrest, chief investment officer, Bokeh Capital Partners, Pittsburgh.
“The Fed is not going to be very aggressive and hurt bigger banks by raising interest rates.”
Regional bank stocks rebounded after suffering double-digit losses over the past few days, with the KBW Regional Banking index up 7.7%.
First Republic Bank jumped 52.7% before trading in its shares was suspended due to volatility. Shares of peer Western Alliance Bancorp were also suspended. The S&P 500 banking index rose 3.9% after recording its biggest one-day percentage fall since June 2020 in the previous session. Meta Platforms Inc rose 5.8% after parent Facebook said it would cut 10,000 jobs in a second round of mass layoffs.
Other major Big Tech and growth stocks such as Apple, Alphabet Inc and Tesla rose between 1% and 4% in early trade.
At 9:38 a.m. ET, the Dow Jones Industrial Average was up 305.98 points, or 0.96%, at 32,125.12, the S&P 500 was up 57.28 points, or 1.49%, at 3,913.04, and the Nasdaq Composite was up 931 points. up . %, is 11,382.74.
Shares of ride-hailing companies Uber Technologies Inc and Lyft Inc rose 7% and 8.6% respectively, after a California state court revived a ballot measure that allowed app-based services to treat drivers as independent contractors rather than employees.
United Airlines Holdings Inc fell 6.2% after the US carrier on Monday forecast an unexpected loss in the current quarter.
Advancing issues outnumbered decliners by a 7.92-to-1 ratio on the NYSE and by a 4.87-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and no new lows, while the Nasdaq recorded 9 new highs and 36 new lows.