Nasdaq leads gains on Wall St on signs of easing inflation

NEW YORK: The Nasdaq led gains among Wall Street's main indexes on Wednesday as a slightly lower-than-expected increase in inflation last month indicated that the Federal Reserve's rapid interest rate hikes were yielding result.

The U.S Treasury yields fell while the Nasdaq (.IXIC) jumped as much as 1.17% to its highest intraday level in more than eight months, with large-cap tech stocks including Apple Inc (AAPL.O) and Microsoft Corp (MSFT.O) up about 0.6% and 1%, respectively.

The Labor Department's Consumer Price Index (CPI) rose 4.9% in April from a year ago and compared with expectations of a 5% increase. Month-over-month CPI in April rose 0.4% after gaining 0.1% in March.

Fed funds futures traders are now pricing in a pause in rates in the central bank's June meeting, and less than a 10% chance of another 25 basis points hike. FEDWATCH

"The market is pricing in a Fed cut beginning this summer. While inflation is decelerating, it's not decelerating at a pace that would justify cutting the Fed funds rate anytime before the fourth quarter of 2023," said Matthew Palazzolo, senior investment strategist at Bernstein Private Wealth Management.

"There are some fairly encouraging signs underneath the surface when you look at the release. That should be viewed somewhat positively by markets, but muted to a certain extent by some of the risks...most notably the debt ceiling issue."

Talks on raising the U.S. federal government's $31.4 trillion debt ceiling entered a new phase on Wednesday as some areas of potential compromise emerged after Tuesday's White House meeting.

At 12:07 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 136.11 points, or 0.41%, at 33,425.70, the S&P 500 (.SPX) was up 2.17 points, or 0.05%, at 4,121.34, and the Nasdaq Composite (.IXIC) was up 69.54 points, or 0.57%, at 12,249.09.

The rate-sensitive S&P 500 technology sector index (.SPLRCT) rose 0.9%, while communication services (.SPLRCL) rose 0.2%.

Regional bank shares extended declines from volatile sessions last week on concerns about the sector's health. PacWest Bancorp (PACW.O) lost 2%, while Zions Bancorporation (ZION.O) and Western Alliance Bank (WAL.N) inched lower 1.8% and 0.2%, respectively.

Alphabet Inc (GOOGL.O) gained 1.1% as the Google-parent was set to unveil more artificial intelligence in its products to answer the latest competition from Microsoft.

Oil and gas producer Occidental Petroleum Corp (OXY.N) fell 3.6% after its first-quarter earnings fell short of analysts' estimates.

Livent Corp (LTHM.N) added 5.4% after Australian lithium miner Allkem Ltd (AKE.AX) agreed to merge with the U.S.-based chemical manufacturing firm to create a $10.6 billion firm.

Airbnb Inc (ABNB.O) lost 10% as the vacation rental booking company saw fewer bookings and lower average daily rates in the second quarter.

Rivian Automotive (RIVN.O) jumped 4.6% after the EV maker beat first-quarter results estimates and reiterated its annual production forecast.

Advancing issues outnumbered decliners by a 1.14-to-1 ratio on the NYSE and by a 1.20-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52-week highs and eight new lows, while the Nasdaq recorded 66 new highs and 101 new lows.