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Wall Street Rallies as Inflation Slows 06/12 09:54

   U.S. stocks are jumping amid a worldwide rally Wednesday following a 
surprisingly encouraging update on inflation.

   NEW YORK (AP) -- U.S. stocks are jumping amid a worldwide rally Wednesday 
following a surprisingly encouraging update on inflation.

   The S&P 500 was 1.1% higher in morning trading and on track to add to its 
all-time high set a day earlier. The Dow Jones Industrial Average was up 270 
points, or 0.7%, as of 10 a.m. Eastern time, and the Nasdaq composite was 1.6% 
higher.

   The action was even stronger in the bond market, where Treasury yields 
tumbled after the report showed U.S. consumers paid prices that were 3.3% 
higher for food, insurance and everything else last month, versus a year 
earlier. Economists had been expecting to see the inflation rate stuck at 3.4%.

   For Wall Street, a slowdown in inflation not only helps U.S. households 
struggling to keep up with fast-rising prices, it also opens the door for the 
Federal Reserve to cut its main interest rate. Such a move would ease pressure 
on the economy and give a boost to investment prices.

   Everything from bitcoin to gold to copper rallied after the inflation data 
raised expectations for coming cuts to interest rates. A measure of nervousness 
among investors in U.S. stocks also eased.

   Virtually no one expects the Federal Reserve to start cutting interest rates 
at its latest meeting, which is scheduled to end Wednesday afternoon. The Fed 
has been adamant that it needs an accumulation of data showing inflation is 
sustainably heading toward its 2% target.

   "This is good news, but we will need more of it," according to Lindsay 
Rosner, head of multi-sector investing within Goldman Sachs Asset Management.

   But it's welcome news after progress on bringing inflation down seemed to 
stall early this year. Some stronger-than-expected reports recently on the job 
market also raised worries about upward pressure remaining on inflation. Of 
course, too quick a slowdown in inflation could also raise worries that 
spending by U.S. consumers is falling off too sharply, which could lead to a 
recession.

   Bets among traders built for the Federal Reserve to cut interest rates as 
soon as September, according to data from CME Group.

   That had areas of the stock market that tend to benefit most from lower 
interest rates doing the best amid a widespread rally.

   Smaller companies that need to borrow to grow and feel the pinch of higher 
interest rates more than their larger rivals were leading the market. The 
smaller stocks in the Russell 2000 index jumped 2.7%.

   Real-estate stocks were also shooting higher. Lower interest rates mean 
bonds are paying less in interest, which can send potential investors to 
dividend-paying real-estate owners instead. Office owner Boston Properties 
jumped 5.9%.

   Lower interest rates could also pull down mortgage rates and inject energy 
into the housing market. Homebuilder D.R. Horton climbed 5.2%.

   Oracle helped lead Wall Street higher with a jump of 12.6% even though it 
reported weaker profit for the latest quarter than analysts expected. Financial 
analysts pointed to strong bookings, including contracts related to 
artificial-intelligence training.

   A furor around AI has helped send stocks to records despite worries about 
high interest rates and the slowdown in the economy that they induce. Nvidia 
again was one of the strongest forces pushing the S&P 500 higher, with a gain 
of 3%. The chip company has become the poster child of the AI rush, and its 
total market value has topped $3 trillion.

   In the bond market, the yield on the 10-year Treasury fell to 4.27% from 
4.40% late Monday and from 4.60% a couple weeks ago. The two-year Treasury 
yield, which more closely tracks expectations for the Fed, slumped to 4.67% 
from 4.83% late Monday.

   In stock markets abroad, European indexes jumped following the release of 
the encouraging U.S. inflation data. In Asia, where markets closed before the 
data came out, indexes were mixed. Japan's Nikkei 225 index lost 0.7% as 
investors wait for the Bank of Japan's latest announcement on interest rates 
due Friday.

 
 
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