• US stocks rose to fresh records Wednesday as traders took in cool inflation and Fed comments.
  • Inflation was cooler than expected and the Fed nodded to "modest" progress that' been made. 
  • The S&P 500 closed above 5,400 for the first time, 

US stocks rose on Wednesday as investors took in cool inflation data and the Federal Reserve's latest guidance on rate cuts, helping the S&P 500 to another record close.

Major averages ticked higher while bond yields tumbled. The benchmark S&P 500 closed above 5,400 for the first time ever.

The 10-year Treasury fell seven basis points to 6.33%, rising from steeper losses earlier in the day after the central bank updated its outlook to include fewer rate cuts than previously expected.

Consumer price index data came in softer than expected for the month of May, marking the second straight month of cooling inflation readings. Consumer prices rose 3.3% year-over-year, down from April's 3.4% increase.

Fed officials kept rates unchanged at the conclusion of this week's policy meeting, though they acknowledged "modest" progress in bringing down inflation. The central bank is now penciling in just one rate cut by the end of 2024, down from three cuts anticipated earlier this year, according to projections released Wednesday afternoon.

FOMC members said they didn't believe it was "appropriate" to cut rates until they had gained more confidence inflation is trending back to 2%.

"We'll need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%. We know that reducing policy restraint too soon or too much could result in a reversal of the progress we've seen on inflation. At the same time, reducing policy too late or too little could unduly weaken economic activity," Fed Chair Powell said in remarks on Wednesday.

Even as officials dial back their outlook for cuts, markets are optimistic that monetary policy will soon loosen. Fed fund futures show that investors see a 62% chance the Fed will cut rates three times or more by year-end, according to the CME FedWatch Tool.

"The Fed made their decision-making process fairly clear coming into today's meeting, and their policymakers are reacting to incoming data in a manner that is consistent with that process," Bill Adams, Comerica Bank chief economist, said in a statement. "If inflation continues to moderate, as has been the trend over the last year and a half, the Fed will start to cut interest rates in the second half of 2024."

Here's where US indexes stood at the 4:00 p.m. closing bell on Wednesday:

In commodities, bonds, and crypto:

  • Oil futures were up. West Texas Intermediate crude oil ticked higher 0.5% to $78.29 a barrel. Brent crude, the international benchmark, ticked up 0.6% to $82.42 a barrel.
  • Gold rose to $2,319.92 per ounce.
  • The 10-year Treasury yield dropped seven basis points to 4.35%.
  • Bitcoin edged lower to $67,494.
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