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A rally on Wall Street yesterday is lifting stocks to their highest level in almost two months following the latest sign that inflation continues to cool. Yesterday’s report showed that prices paid to producers last month were 2.7% higher than a year earlier, the lowest inflation level there in more than two years. The hope on Wall Street is that easier inflation on the wholesale level will not only support profits for companies but also flow through to cooler inflation for consumers. A day earlier, a separate report said inflation for consumers slowed to 5%.

Inflation and how high the Federal Reserve will hike interest rates to tame it have been at the center of Wall Street’s struggles for more than a year. The Fed has hiked rates at such a feverish pace over the last year that it’s already slowed parts of the economy and caused strains to appear in the banking system.

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And so, stocks climbed on the cooler-than-expected PPI, and perhaps some optimism around the Q1 earnings season, with several big banks reporting Friday. However, expectations around Fed policy didn’t budge much.

Bond yields were little changed and markets still see a 70% probability of the Fed enacting a quarter-point rate increase in May, according to the CME FedWatch tool.

The following is a round-up of yesterday’s market activity:

• The S&P 500 Index was up 54.27 points (1.3%) at 4146.22; the Dow Jones industrial average was up 383.19 (1.1%) at 34,029.69; the NASDAQ Composite was up 236.93 (2.0%) at 12,166.27.
• The 10-year Treasury yield was up about 3 basis points at 3.447%.
• CBOEs Volatility Index was down 1.29 at 17.80.

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Filed under: "Ask-an-Advisor", Alerts Sign-Up, Financial Planning, Glossary Terms, Information Technology, Investing | Tagged: CBOE, CPI, DJIA, DOW, fed, Federal Reserve, FedWatch, FOMC, gold, inflation, NASDAQ, oil, S&P 500, Wall Street |