Investing.com– U.S. stocks edged higher Tuesday, with hotter than expected U.S. producer prices failing to dim optimism over the prospect of Federal Reserve interest rate cuts.
At 09:40 ET (13:40 GMT), the Dow Jones Industrial Average climbed 55 points, or 0.1%, S&P 500 rose 4 points, or 0.1%, and NASDAQ Composite traded 25 points, or 0.2%, higher.
PPI surprises on the upside
U.S. producer prices grew by a faster-than-anticipated rate of 0.5% on a monthly basis in April, due mainly to elevated costs for services and goods, in a sign of lingering inflationary pressures early in the second quarter.
It was a quicker pace than an increase of 0.3% economists had predicted and up from a downwardly revised month-on-month contraction of 0.1% in March.
In the twelve months through April, the producer price index for final demand moved up by 2.2% as expected — the largest uptick since a jump of 2.3% in April 2023. An updated mark for the previous month was also revised lower to 1.8%.
The more closely watched consumer price index is due on Wednesday, and these readings come after inflation remained largely sticky through the first quarter, dashing expectations of early interest rate cuts this year.
A string of Federal Reserve officials have warned in recent weeks that the central bank was in no hurry to begin cutting rates, and needed more confidence that inflation was moving back towards its 2% annual target.
That said, expectations over interest rate cuts have made investors the “most bullish” since November 2021, Bank of America’s monthly fund manager survey for May showed on Tuesday.
The survey of global fund managers with $562 billion in asset under management found 82% expect the first by the rate cut by the Federal Reserve in the second half, while 78% say a recession is unlikely over the next 12 months.
GameStop extends rally
One sector of the market which has seen volatile trading has been the so-called meme stocks, with videogame retailer GameStop (NYSE:GME) the prime example.
GameStop stock soared almost 90% after a 74% rally during Monday’s session.
Fueling the jump was the first post on X.com in three years from “Roaring Kitty”, an account linked to a financial markets commentator and social media influencer Keith Gill. Gill, also known as “Deep F***ing Value” on forum website Reddit, became a figurehead of a frenzy of trading in so-called “meme stocks” like GameStop and theater chain AMC Entertainment (NYSE:AMC) in 2021.
AMC and headphones maker Koss Corporation (NASDAQ:KOSS) shares also rose sharply.
The “Roaring Kitty” account posted a series of well-known internet memes, including an image of a man leaning forward in a chair that is used to signify the growing seriousness of a situation. “Roaring Kitty” also posted a collection of other memes, although none of them mentioned GameStop or other stocks.
Elsewhere, Kraft Heinz (NASDAQ:KHC) stock fell 0.3% after the Wall Street Journal reported the food giant is exploring a sale of its Oscar Mayer meats business that could fetch anything between $3 billion to $5 billion, while Bloomberg reported that Apple (NASDAQ:AAPL) is gearing up to sell its Vision Pro mixed-reality headset outside the United States. Apple stock gained 1%.
Crude slips after PPI release
Crude prices slipped lower Tuesday after the PPI release, handing back some of the previous session’s strong gains as wildfires in Canada run the risk of disrupting the country’s oil supply.
By 09:35 ET, the U.S. crude futures traded 0.8% lower at $78.50 per barrel, while the Brent contract dropped 0.7% to $82.78 a barrel.
Both contracts rose more than 1% each on Monday.
Major wildfires have spread across Western Canada, presenting the potential for disruptions in Canadian oil and gas supplies, especially as they neared a key oil hub in Fort McMurray, Alberta.
The city is the closest settlement to Canada’s biggest oil-sands operations, and had in 2016 suffered severe damage from wildfires, knocking around 1 million barrels per day out of commission at the time.
