While you were sleeping: Lukewarm inflation data lifts Wall St

Wall Street rallied as a report showing lower-than-expected inflation eased concern the Federal Reserve will have to accelerate its planned pace of interest rate increases.

A Labour Department report showed its consumer price index rose 0.2 percent in April, falling short of economists’ forecasts, while core CPI, which excludes food and energy prices, inched 0.1 percent higher last month.

“This data lends to the argument that the Fed can normalise patiently, but the flip side is that prolonged policy accommodation has yet failed to accelerate inflation,” Peter Cecchini, chief market strategist at Cantor Fitzgerald in New York, wrote in a note, Reuters reported.

A separate Labour Department report showed jobless claims were steady at a seasonally adjusted 211,000 for the week ended May 5.

"The more muted … gain in core CPI suggests that the surge in underlying inflation in the first few months of the year has faded," Michael Pearce, senior US economist at Capital Economics, said in a note. "Even so, we still expect core inflation to rise further from here, as tighter labour market conditions push wage costs gradually higher.”

To be sure, Pearce predicts the Fed to will raise rates a total of four times in 2018 and twice in the first half of 2019.

"The big picture remains that core inflation has accelerated this year faster than Fed officials anticipated just a few months ago, which will keep the Fed on track to raise interest rates again in June," Pearce noted. "And with the jobless claims data … showing that labour market conditions are still tightening, we think underlying inflation will trend higher from here."

Wall Street climbed. In 2.24pm trading in New York, the Dow Jones Industrial Average advanced 0.8 percent, while the Nasdaq Composite Index also rose 0.8 percent. In 2.10pm trading, the Standard & Poor’s 500 Index climbed 0.9 percent.

The Dow moved higher, led by gains in shares of Walt Disney and those of UnitedHealth Group, recently up 2 percent and 1.9 percent respectively. Shares of Nike and those of Chevron, recently down 0.07 percent and 0.02 percent respectively, were the only stocks in the Dow to decline in afternoon trading.

Shares of CenturyLink rallied, up 8.2 percent as of 2.20pm in New York, after the telecom company posted quarterly earnings that beat expectations, though sales fell short, and bolstered optimism about its acquisition of Level 3.

"CenturyLink achieved solid results for first quarter 2018, the first full quarter of operations following the acquisition of Level 3," Glen Post, CenturyLink chief executive officer, said in a statement. "Now positioned as one of the world's leading network providers, we believe we have significant opportunities to grow our business and drive long-term shareholder value."

Meanwhile, shares of Envision Healthcare Corporation climbed, up 5.4 percent as of 2.25pm in New York, amid reports of a pending buyout offer by KKR & Co. The New York buyout shop is putting together a bid for Envision Healthcare that could top US$11 billion and mark the return of highly leveraged mega-buyouts, sources said, according to the New York Post.

In Europe, France’s CAC 40 Index gained 0.2 percent, the UK’s FTSE 100 Index added 0.5 percent, while Germany’s DAX index rose 0.6 percent.