Stock market today: Wall Street climbs after report shows consumer inflation cooled in April

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NEW YORK (AP) — U.S. stocks are rising Wednesday with hope that inflation is finally heading back in the right direction, and the S&P 500 is above its record set a month and a half ago. But a stall in spending by U.S. households tired after years of high inflation is keeping the gains in check.

The S&P 500 was 0.6% higher in early trading. The Nasdaq composite was adding to its own record set a day earlier, up 0.7%, and the Dow Jones Industrial Average was up 206 points, or 0.5%, as of 9:35 a.m. Eastern time.

Relief was coming from the bond market, where Treasury yields eased to release some of the pressure on the stock market. The moves resulted from rising expectations among traders that the Federal Reserve may indeed cut its main interest rate this year.

Stocks that tend to benefit the most from lower interest rates led the market. Real-estate stocks in the S&P 500 jumped 1.9% for the biggest gain by far among the 11 sectors that make up the index. Homebuilders were also strong on hopes that cuts by the Fed would lead to easier mortgage rates, with Lennar and D.R. Horton both up at least 3%.

The optimism came from a report showing U.S. consumers had to pay prices for gasoline, car insurance and everything else in April that were 3.4% higher overall than a year earlier. While that’s painful, it’s not as bad as March’s inflation rate of 3.5%.

Perhaps more importantly, the slowdown was a relief after reports for the consumer price index, or CPI, earlier this year had consistently come in worse than expected. That string of disappointing data had washed out forecasts for the Federal Reserve to soon lower its main interest rate, which is sitting at its highest level in more than two decades.

A cut in rates would help goose investment prices and remove some of the downward pressure on the economy.

“There was a lot lying on today’s CPI print to prove that disinflation was simply delayed these last three months and not derailed,” according to Alexandra Wilson-Elizondo, co-chief investment officer of the multi-asset solutions business in Goldman Sachs Asset Management.

A separate report showed spending at U.S. retailers was flat in April from March. It was a weaker showing than the 0.4% growth economists expected.

Slowing retail sales could be seen as a positive for markets, because it could reduce the upward pressure on inflation. But a stalling out also raises worries about cracks forming in U.S. consumer spending, which has been one of the main pillars keeping the economy out of a recession. Pressure has been particularly high on lower-income households, which are fighting still-high inflation.

“Hopefully the consumer isn’t running out of steam, but with pandemic savings spent, rising delinquencies, slower wage growth, and now flat retail sales, a more abrupt slowing of the economy can’t be ruled out,” said Brian Jacobsen, chief economist at Annex Wealth Management.

Another discourage report, meanwhile, said manufacturing in New York state is contracting more than expected.

On Wall Street, Petco Health + Wellness was helping to lead the market after jumping 7.1%. It named Glenn Murphy, who is CEO of investment firm FIS Holdings, as its executive chairman.

On the losing end were GameStop and AMC Entertainment, as momentum reverses following their jaw-dropping starts to the week. GameStop fell 14.3% to trim its gain for the week to just below 140%.

AMC Entertainment fell 9.8% after it said it will issue nearly 23.3 million shares of its stock to exchange for $163.9 million in debt that it owes.

In the bond market, the yield on the 10-year Treasury eased to 4.36% from 4.45% late Tuesday. The two-year yield, which moves more closely with expectation for Fed action, sank to 4.75% to from 4.82%.

In stock markets abroad, indexes were mixed. Stocks fell 0.8% in Shanghai after China’s central bank left a key lending rate unchanged.

AP Writers Matt Ott and Zimo Zhong contributed.