Markets Rally Ahead of Key Report on Inflation

Stocks closed higher on Wall Street as investors made their final moves ahead of a highly anticipated report on inflation. The S&P 500 rose 1.3% Wednesday, its second straight gain before Thursday morning's inflation data. Economists expect the report to show that inflation continued to cool last month from its summertime peak, the AP reports. That would bolster growing hopes on Wall Street that the Federal Reserve could soon ease off its campaign to hike interest rates in order to snuff out inflation. The S&P 500 rose 50.36 points to 3,969.61. The Dow Jones Industrial Average rose 268.91 points, or 0.8%, to 33,973.01. The Nasdaq rose 189.04 points, or 1.8%, to 10,931.67. Some so-called "meme stocks" rose sharply, especially Bed Bath & Beyond, which jumped 68.6% despite a grim financial outlook, reports CNBC.

Stocks have started 2023 with gains on hopes that cooling inflation and a slowing economy may get the Federal Reserve to ease off its sharp hikes to interest rates. Such increases can help stamp out high inflation, but they also slow the economy by design and raise the risk of a recession while hurting prices for stocks and other investments. Economists expect Thursday’s report to show inflation is continuing to cool from its summertime peak, down to 6.5% last month from 7.1% in November and from more than 9% in June. Hope is growing among investors that the economy could successfully walk the tightrope of slowing enough to snuff out high inflation but not so much as to cause a deep recession.

That's helped spark a mini-rebound for some of the stocks that fell the most last year, which plunged in large part because of rising rates and fears of inflation. Facebook’s parent, Meta, is up more than 10% so far in 2023 after slumping 64% in 2022, for example. The central bank, however, does not envision any rate cuts happening this year and it has said that any "unwarranted" rallies on Wall Street "driven by a misperception" will only make the mission of returning inflation to normal more complicated. Later this week, companies will also begin reporting how much profit they made during the last three months of 2022, which will offer a window into how companies are managing the squeeze of inflation.

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