Investing.com – U.S. stocks rose on Tuesday as higher-than-expected U.S. producer prices failed to dampen optimism about the prospect of the Federal Reserve cutting interest rates.
At 09:40 ET (1340 GMT), shares were up 55 points, or 0.1%, up 4 points, or 0.1%, and trading up 25 points, or 0.2%.
PPI brings surprises
U.S. producer prices rose at a faster-than-expected rate of 0.5% month-on-month in April, driven primarily by rising prices for services and goods, a sign of persistent inflationary pressures early in the second quarter.
It was a faster pace than economists had predicted and higher than the downwardly revised 0.1% monthly contraction in March.
In the twelve months to April, the final demand producer price index rose by 2.2%, as expected, the biggest increase since the 2.3% jump in April 2023. The previous month’s update was also revised down to 1.8%. .
A closer look will be released on Wednesday, and the data comes after inflation remained largely stable during the first quarter, belying expectations of an early interest rate cut this year.
A number of Federal Reserve officials have warned in recent weeks that the central bank is in no hurry to begin cutting rates and needs more confidence that inflation is returning to its annual 2% target.
Still, expectations for lower interest rates have made investors the “most optimistic” since November 2021, Bank of America’s monthly fund manager survey for May showed Tuesday.
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The survey of global fund managers with $562 billion in assets under management found that 82% expect the Federal Reserve’s first rate cut to occur in the second half of the year, and 78% say a recession is unlikely within the next 12 months.
GameStop extends rally
One sector of the market that has seen volatile trading is so-called meme stocks, of which video game retailer GameStop (NYSE:) is a prime example.
GameStop shares are up nearly 90% after rising 74% during Monday’s session.
Fueling the surge was the first X.com post in three years from “Roaring Kitty,” an account associated with financial markets commentator and social media influencer Keith Gill. Gill, also known as “Deep F***ing Value” on the forum site Reddit, has become the figurehead of the trading frenzy of so-called “meme accounts” such as GameStop and movie theater chain AMC Entertainment (NYSE:) in 2021.
Shares of AMC and headphone maker Koss Corporation (NASDAQ:) also rose sharply.
The Roaring Kitty account posted a series of famous internet memes, including an image of a man leaning forward in a chair, which is used to indicate the growing seriousness of the situation. “Roaring Kitty” also posted a collection of other memes, although none of them mentioned GameStop or other stocks.
Kraft Heinz (NASDAQ:) shares fell 0.3% after the Wall Street Journal reported that the food giant is considering selling its Oscar Mayer meat business, which could be worth between $3 billion and $5 billion, while the agency Bloomberg reported that Apple (NASDAQ: ) is preparing to sell its Vision Pro mixed reality headset outside the US. Apple shares rose 1%.
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Oil falls after the publication of the producer price index
Crude oil prices fell on Tuesday following the release of the producer price index, giving up some of the previous session’s strong gains as wildfires in Canada risk disrupting the country’s oil supply.
By 09:35 ET, U.S. crude futures were trading 0.8% lower at $78.50 a barrel, while the Brent contract fell 0.7% to $82.78 a barrel.
Both contracts rose more than 1% each on Monday.
Major wildfires have spread across Western Canada, creating potential disruptions to Canadian oil and gas supplies, especially as they approach the key oil hub of Fort McMurray, Alberta.
The city is the closest community to Canada’s largest oil sands fields and was hit hard by wildfires in 2016, knocking out about 1 million barrels a day at the time.
(Ambar Warrick contributed to this article.)