Stocks rise in volatile trade after US inflation as yields climb

Stocks rise in volatile trade after US inflation as yields climb

By Chuck Mikolajczak

NEW YORK (Reuters) -A gauge of global stocks rose in choppy trading on Tuesday after data showed U.S. inflation remained sticky in February, indicating the Federal Reserve could keep interest rates higher than is currently anticipated.

The consumer price index (CPI) rose 0.4% last month amid higher costs for gasoline and shelter, the Labor Department’s Bureau of Labor Statistics (BLS) said on Tuesday, matching the estimate of economists polled by Reuters, after climbing 0.3% in January.

In the 12 months through February, the CPI increased by 3.2%, just above the 3.1% estimate, after advancing 3.1% through January.

“Some parts of the CPI report were hot while others were not. While energy and transportation services were hot, food, new vehicles, and medical care services were not,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.

“Powell’s super-core inflation decelerated from the super-hot January reading, so that’s reassuring … The Fed wasn’t planning on cutting next week anyways, so this report doesn’t change the discussion they’ll have around the table.”

On Wall Street, the Dow Jones Industrial Average rose 201.36 points, or 0.52%, to 38,971.02, the S&P 500 gained 42.75 points, or 0.84%, to 5,160.69, and the Nasdaq Composite gained 177.11 points, or 1.11%, to 16,196.39, as stocks alternated between gains and losses early in the session.

U.S. Treasury yields were higher after the data showed the yield on benchmark U.S. 10-year notes was up 3.5 basis points at 4.139%. The 2-year note yield, which typically moves in step with interest rate expectations, rose 4.8 basis points to 4.5821%.

Market expectations for the timing of the Fed’s first rate cut remained largely unchanged, pricing in a 66.2% chance of a cut of at least 25 basis points in June, according to CME’s FedWatch Tool, down from 71.7% in the prior session.

MSCI’s gauge of stocks across the globe rose 4.89 points, or 0.64%, to 773.66. In Europe, the STOXX 600 index rose 0.62%, while Europe’s broad FTSEurofirst 300 index rose 12.63 points, or 0.64%.

The dollar also strengthened after the data. The dollar index was last up 0.27% at 103.07, with the euro down 0.12% at $1.0913.

The Japanese yen weakened further against the greenback and was last off 0.6% at 147.83 per dollar.

The yen had already softened against the dollar after Bank of Japan Governor Kazuo Ueda gave a slightly bleaker assessment of the country’s economy than he had in January, dampening hopes the central bank might abandon its negative rate policy when it meets this month.

Sterling weakened 0.41% to $1.276 after data showed UK wage growth cooled slightly more than expected last month, putting a bit more pressure on the Bank of England to cut rates sooner rather than later.

In commodities, U.S. crude gained 0.55% to $78.36 a barrel and Brent rose 0.43% to $82.56 per barrel, as OPEC stood by its forecast for demand growth this year and next amid persistent tensions in the Middle East and beyond.

(Reporting by Chuck Mikolajczak, editing by Milla Nissi)