Stock Market: Controlled inflation, Wall Street soars, CAC 40 misses the mark

The flagship indices of Wall Street, the S&P 500 and the Nasdaq Composite, reached new heights this Wednesday, galvanized by a reassuring report on US inflation. The Cac 40, on the other hand, failed to join in the prevailing euphoria, narrowly missing out on equalling its record.

US inflation reassures Wall Street

April’s US inflation data pleasantly surprised investors. Consumer prices rose by only 0.3%, which is one-tenth of a point lower than expected, and 3.4% year-on-year, in line with expectations. Excluding food and energy, prices increased by 3.6% annually, the lowest level since April 2021.

This lull on the inflation front was welcomed by US markets. The S&P 500 and the Nasdaq Composite soared to new heights, gaining between 0.4% and 0.6%. Bond yields, meanwhile, fell, signaling a resurgence of optimism.

However, experts remind that it will take more than a month of gains to convince the Federal Reserve to ease its monetary policy. The re-acceleration of services inflation excluding housing remains worrisome and could prompt the Fed to maintain high rates until September.

Mixed signals on consumption

Besides inflation, April’s retail sales disappointed, stagnating while analysts had expected a 0.4% increase. Excluding automobiles, gasoline, building materials, and food services, they even fell by 0.3%.

Nevertheless, economists are downplaying this downturn, attributing it to a compensatory effect after several months of strong consumption. They maintain their forecasts of solid household spending growth in the second quarter, despite the pressure of high interest rates.

Rebound in Europe, CAC 40 lags behind

In Europe, the European Commission has revised down its inflation projections for 2024, now expecting 2.5% compared to 2.7% previously. GDP growth is confirmed at 0.8% this year and 1.4% next year.

On the corporate front, CGG soared by 20% after solid quarterly results, while Trigano fell by 9% despite increased profit, penalized by disappointing cash generation.

Despite Wall Street’s euphoria, the CAC 40 failed to break its own record this Wednesday. While the slowdown in US inflation is a good sign, caution remains given the conflicting signals sent by the economy. Investors will keep a close eye on upcoming indicators to gauge the markets’ trajectory in the months ahead.