Equity ETFs Hit All-Time Highs as Inflation Cools

U.S. stocks soared to all-time highs on Wednesday after the government reported better-than-feared inflation figures for April.

The $522 billion SPDR S&P 500 ETF Trust (SPY) jumped 1%, bringing its year-to-date gains up to nearly 12%.

Core consumer prices increased by 0.3% from March to April, according to the Bureau of Labor Statistics, the slowest pace of the year and equal to economists’ expectations.

On a year-over-year basis, the core CPI rose by 3.6%, the smallest increase in three years.  

While still higher than the Federal Reserve’s 2% inflation target, a month of as-expected inflation figures was a relief to investors who had witnessed three hotter-than-expected readings for January, February and March.  

April’s data boosted the notion that elevated inflation during the first quarter might have been a bump in the road and that price pressures would cool from here.

The 10-year and 30-year Treasury bond yields each dripped around 10 basis points on Wednesday, pushing the iShares 7-10 Year Treasury Bond ETF (IEF) and the iShares 20+ Year Treasury Bond ETF (TLT) up by 0.8% and 1.5%, respectively.

In April, the yield on the 10-year rose as high as 4.7% as investors speculated that the Fed might not cut rates at all this year and might instead raise interest rates as its next move.

Those fears abated on Wednesday. The pricing of Fed funds futures suggests that the central bank might cut rates two times this year—in September and December.

The S&P 500 fell as much as 5.5% from peak-to-trough during April. All of those losses and then some have been wiped out following today’s move.

The $267 billion Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100 also hit record highs on Wednesday. The tech-heavy exchange-traded fund is up 10.3% so far this year.