U.S. stocks higher in early trading after inflation data

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U.S. STOCKS HIGHER IN EARLY TRADING AFTER INFLATION DATA (1030 EDT/1430 GMT)

Wall Street shares turned higher early Wednesday in choppy trading after U.S. data showed the pace of inflation slowed last month, but on annual basis it rose 8.3%, higher than what analysts had forecast.

Among the subsectors, the S&P energy index was the biggest gainer, up 3.2%, with the real estate the next largest gainer, rising 1.7% on the day.

Stocks initially opened lower as the inflation data fueled concerns that the Federal Reserve will tighten policy rates aggressively.

Fed funds futures are still pricing a roughly 90% chance of a 50 basis-point hike next month after the data, according to the CME’s FedWatch tool. With Fed officials, led by Chairman Jerome Powell ruling out a 75 basis-point tightening in June, the probability of that rate increase is just at 12%.

Here is an early morning market snapshot:

(Gertrude Chavez-Dreyfuss)

ARE STOCKS A BUY YET? BCA SAYS YES (0900 EDT/1300 GMT)

With the S&P 500 down around 16% year-to-date, BCA Research says that price declines now make stocks attractive, and the firm has upgraded its tactical trade recommendation on global equities to “overweight.”

Global equities are trading at 15.6 times forward earnings, and only 12.6 times outside of the United States, the firm said. “More importantly, the forces that pushed down stock prices are starting to abate.”

“The war in Ukraine no longer seems likely to devolve into a broader conflict; the number of new Covid cases in China has fallen by half; and global inflation has peaked,” BCA said in a report sent on Tuesday. “The outlook for stocks has brightened.”

Stocks were on track to open lower on Wednesday after a volatile couple of sessions as investors fret over the impact of rising rates and the prospect of the Federal Reserve getting even more hawkish as it tackles soaring inflation.

Data on Wednesday showed that U.S. consumer price growth slowed sharply in April as gasoline prices eased off record highs, suggesting that inflation has probably peaked, though it is likely to stay hot for a while.

BCA had downgraded its tactical recommendation on stocks, which is a three-month view, to “neutral,” from “overweight,” on Feb. 28.

Here is the early U.S. market snapshot:

(Karen Brettell)

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