The U.S. stocks surged at the opening bell on June 12th, following an encouraging inflation report. The session remained volatile until the Federal Open Market Committee (FOMC) announcement. However, neither the Federal Reserve’s decision nor Chairman Powell’s comments significantly impacted the market, which remained near the day’s highs post-CPI data. Despite some selling pressure in the final 30 minutes of trading, the S&P 500 still ended the day with a gain of 0.85%. The Nasdaq outperformed, buoyed by Apple, which rose an additional 1.33% and Nvidia, which surged by 3.55%. Below we share some more insights.

CPI data inspired the stock market

The Consumer Price Index (CPI) for May remained steady at 0.0% month-over-month, falling short of the anticipated 0.1%. This represents the first instance of no change since October 2023.

Year-over-year, the CPI increased by 3.3%, slightly below the projected 3.4%, marking the slowest annual growth rate since February 2024.

This leveling off indicates that inflationary pressures are diminishing, leading to a positive market reaction following the data release.

The Core CPI, which omits volatile food and energy prices, rose by 0.2% month-over-month, missing the expected 0.3%. On an annual basis, core inflation climbed by 3.4%, just shy of the predicted 3.5%, reaching its slowest rate in three years.

The report emphasized that although gasoline prices decreased, the overall effect on the Consumer Price Index (CPI) was neutralized by rising expenses in other areas, especially housing. The housing index, which encompasses housing-related costs, increased by 0.4% for the fourth month in a row and was the largest factor driving up core inflation.

Categories like clothing, household items, car insurance, and personal care saw reductions, which helped to moderate the overall inflation rate.

Following the release, FedWatch estimated a 71% likelihood of a rate cut in September, an increase from the 49% probability indicated after Friday’s payroll data.

Treasury yields decreased after the release of CPI data, with the 10-year yield falling by 10.7 basis points to reach 4.301%. In the commodities market, oil prices rose, with WTI crude oil futures gaining 0.64% to trade around $78.5 per barrel. Additionally, gold futures increased by 0.5%, reaching $2,340 per ounce.

The FOMC meeting provided more volatility

On June 12, 2024, the Federal Open Market Committee (FOMC) held a meeting where they decided to keep interest rates unchanged. This decision came amidst ongoing efforts to control inflation and maintain economic stability.

Stock Market Reaction:The initial reaction of the stock market was mixed. The Dow Jones Industrial Average fell by more than 90 points, but the S&P 500 andNasdaqmanaged to head towards record closes. This suggests that while some investors were cautious, others were optimistic about the Fed’s stance on potential future rate cuts.

Jerome Powell’s Speech:During his speech, Fed Chairman Jerome Powell emphasized that the decision to hold rates steady was based on current economic data and projections. He also mentioned that while only one rate cut was penciled in for 2024, this could change depending on future economic conditions. Powell’s remarks were intended to convey the Fed’s flexibility and responsiveness to economic changes.

Market Volatility:Following Powell’s speech, the stock market experienced some choppiness. The S&P 500 and Nasdaq initially pared gains but eventually stabilized. In my view, this volatility reflects the market’s sensitivity to Fed communications and the broader economic outlook.

Overall, the market’s reaction to the FOMC meeting and Powell’s speech was one of cautious optimism, with significant attention to future economic indicators and Fed decisions.

Our view – Market Trend summary

As of June 13, 2024, the S&P 500 Index is experiencing a positive trend. The index has risen by approximately 0.9%, contributing to an overall gain ofabout 14%for the year, reflecting a strong performance in the stock market. This trend is part of a broader rally within the stock market, with the tech-heavy Nasdaq Composite also seeing significant gains (1.5%).

Additionally, the S&P 500 futures have shown positive movement, climbing by 0.13% recently, indicating continued investor confidence. Overall, the current trend for the S&P 500 Index is upward, reflecting solid market performance and investor optimism.

In my opinion, it appears that individuals are purchasing stocks such as Nvidia, Apple, and other technology giants without adequately assessing their valuations and inherent stock market risks. My objectives in the S&P 500 Index have been met at 5440 and in the Nasdaq 100 Index my target level was 19,500. Interpret this as you like, but usually, a downward correction is now expected. I would recommend investors to switch to a wait-and-see mode for the rest of the week.

Stocks we watch today

ADOBE INC. (ADBE) – should report today after market close.

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