Wall Street ticks higher as hot US inflation cools further

NEW YORK (AP) — Wall Street is drifting higher Thursday after a report showed inflation slowed again last month, bolstering hopes the Federal Reserve may take it easier on the economy through smaller hikes to interest rates.

The S&P 500 was 0.5% higher after flipping between small gains and losses through the morning. While the report on U.S. inflation was clearly encouraging, stocks had already rallied earlier this week in anticipation of exactly such data. The numbers were in line with forecasts on many points, and analysts warned investors not to get carried away by them.

The Dow Jones Industrial Average was up 288 points, or 0.9%, at 34,261, as of 12:30 p.m. Eastern time, and the Nasdaq composite was 0.5% higher. They also earlier drifted between gains and losses.

The nation’s painfully high inflation has been at the center of Wall Street’s wild movements for more than a year. Recently, stocks have been rising and bond yields have been falling on hopes inflation’s cooldown from a summertime peak may get the Federal Reserve to ease off its barrage of rate hikes. Such increases can stifle inflation, but they do so by slowing the economy and risk causing a recession. They also hurt investment prices.

In the bond market, Thursday’s inflation report sent yields falling further as traders grow more convinced the Fed will downshift the size of its next rate increase. They’re now largely forecasting a hike of just 0.25 percentage points next month, down from December's half-point hike and from four prior increases of 0.75 percentage points.

Many traders are betting on the Fed to follow that with perhaps another quarter-point hike, but to then potentially take a pause, according to data from CME Group.

Analysts cautioned that while Thursday’s inflation report did show...