Major US indexes are moving higher on Wednesday (US time) as stability in the bond market translates into gains for stocks.
A key measure of inflation was lower than expected last month, helping to calm investors who had worried that prices could rise too quickly as the economy recovers.
Wall Street is higher across the board on Wednesday.Credit:AP
In early afternoon trade, the S&P 500 is 0.8 per cent higher while the Dow Jones has added 1.4 per cent and the technology-heavy Nasdaq has risen by 0.3 per cent.
It sets up the Australian sharemarket for gains, with futures at 5.03am AEDT pointing to a jump of 29 points, or 0.4 per cent, at the open.
US consumer prices increased 0.4 per cent in February, the biggest increase in six months. However, a closely watched measure called core inflation, which excludes food and energy prices, posted a much smaller 0.1 per cent gain. The rise for core inflation was also below economists’ expectations.
The latest report on inflation, along with the Federal Reserve remaining dovish on raising interest rates, has helped ease concerns over the recent rise in bond yields, said Katie Nixon, chief investment officer at Northern Trust Wealth Management.
Bond yields rose sharply over the past month due to expectations for faster growth and the inflation that could follow. The fall in bond prices attracted investors reluctant to pay high prices for stocks, especially tech stocks that looked most expensive.
“It’s clear that investors expect there to be a bump in inflation in the short term, but the long-term view is pretty benign,” Nixon said. “Investors are coming around to the view that it’s not a bad backdrop for risk assets.”
