Stock and bond investors expecting a “watershed” moment in Wednesday’s inflation data were left disappointed, analysts and economists said, leaving open the debate over whether the market is close to putting in a bottom.
And why not? Investors were looking for confirmation that inflation was finally cooling off after running at its hottest in more than 40 years — beyond the career memory of the vast majority of Wall Street veterans. In the end, the data was somewhat anticlimactic. Yes, inflation slowed, with the annual pace at 8.3% versus the March reading of 8.6%. But it was still plenty hot, and above expectations for a reading of 8.1%.
The Dow Jones Industrial Average DJIA was up 34 points, or 0.1%, while the S&P 500 SPX , which closedMonday at its lowest since March 31, 2021, below the 4,000 threshold, was off 0.5%. The Nasdaq Composite COMP , which fell into a bear market earlier this year, was down 1.7%. “We don’t expect their fortunes to improve decisively until shortly before the Fed stops tightening policy in summer 2023, even as inflation drops back further and the U.S. economy experiences a ‘soft landing’ in the meantime,” he wrote.
“If inflation stays this hot, we expect the Fed to keep taking a hard stance on rate hikes. As we’ve seen, that may be a tough pill for investors to swallow,” said Callie Cox, U.S. investment analyst at eToro, in emailed remarks.
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