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Wall St gains as inflation data bolsters bets of smaller rate hike

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A Wall St. sign is seen in New York City, U.S., March 13, 2023. REUTERS/Brendan McDermid

Wall Street’s main indexes climbed on Tuesday after consumer prices in the world’s largest economy rose in line with expectations, bolstering bets of a smaller interest rate hike by the Federal Reserve at its next meeting.

Data showed that U.S. Consumer Price Index (CPI) rose 0.4% in February versus 0.5% a month ago. On a yearly basis, it rose 6.0% last month, compared with 6.4% in the previous month.

Excluding the volatile food and energy components, the CPI increased 0.5% after rising 0.4% in January. In the 12 months through February, the so-called core CPI gained 5.5% after advancing 5.6% in January.

Traders held on to bets of a 25-basis-point rate hike at the Fed’s next meeting in March, with odds of a pause in hikes slipping a bit to 17%.

Stocks have been hammered in the past few days following the collapse of SVB Financial Group (SIVB.O) and peer Signature Bank (SBNY.O) and on fears of risks to other banks from sharp interest rate hikes by the Fed.

Investors are hoping that the threat of a financial crisis will force the U.S central bank to ease up on monetary tightening.

“In light of the weekend’s events, I don’t think it could have been a more perfect number. It’s showing that inflation is trending the way that the Fed has kind of expected and wanted,” said Kim Forrest, chief investment officer, Bokeh Capital Partners, Pittsburgh.

“The Fed’s not going to be super aggressive and hurt banks more by raising interest rates.”

Regional bank stocks rebounded after suffering double-digit losses over the past few days, with the KBW Regional Banking index (.KRX) up 7.7%.

First Republic Bank (FRC.N) jumped 52.7% before trading in its shares was halted for volatility. Shares of peer Western Alliance Bancorp (WAL.N) were also halted.

The S&P 500 banking index (.SPXBK) rose 3.9% after recording its biggest one-day percentage drop since June 2020 in the previous session.

Meta Platforms Inc (META.O) rose 5.8% after the Facebook-parent said it would cut 10,000 jobs in a second round of mass layoffs.

Other major Big Tech and growth stocks such as Apple (AAPL.O), Alphabet Inc (GOOGL.O) and Tesla (TSLA.O) rose between 1% and 4% in early trade.

At 9:38 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 305.98 points, or 0.96%, at 32,125.12, the S&P 500 (.SPX) was up 57.28 points, or 1.49%, at 3,913.04, and the Nasdaq Composite (.IXIC) was up 193.90 points, or 1.73%, at 11,382.74.

Shares of ride-hailing companies Uber Technologies Inc (UBER.N) and Lyft Inc (LYFT.O) rose 7% and 8.6% respectively, after a California state court revived a ballot measure allowing app-based services to treat drivers as independent contractors rather than employees.

United Airlines Holdings Inc (UAL.O) fell 6.2% after the U.S. carrier on Monday forecast an unexpected loss in the current quarter.

Advancing issues outnumbered decliners by a 7.92-to-1 ratio on the NYSE and by a 4.87-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and no new lows, while the Nasdaq recorded 9 new highs and 36 new lows.

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