Major ETFs Rise on April CPI

Factset's median estimate called for a 3.4% reading.

Major ETFs jumped higher in morning trading after the Consumer Price Index (CPI), a key inflation measure, arrived slightly lower than expected for April.

The U.S. Commerce Department reported that CPI rose 3.4% year-over-year and 0.3% from March. Core CPI, which strips away less volatile food and energy costs was 3.6%. 

Investors had eyed the latest report hopefully amid a few signs that inflationary pressure was finally relenting after a first quarter of unexpectedly hot readings. On Tuesday, although the Producer Price Index—another widely watched inflation gauge—rose more than expected in April, some of its components, including airfare, dipped, and the Commerce Department revised its March reading downward. Last week, jobless claims, which connects to price gains, rose for the first time in weeks. 

Factset's median estimate based on 11 separate forecasts called for a 3.4% CPI, down from 3.5% in March and the first sequential decrease since January.

Stocks rose following the report with the S&P 500 climbing 0.6%, the tech-heavy Nasdaq jumping 0.6%, pushing the tech-heavy index above its all-time high. The largest stock ETFs by assets under management, the SPDR S&P ETF Trust (SPY) and Vanguard 500 Index Fund (VOO) rose 1%, while the Invesco QQQ Trust (QQQ) increased 0.6%. 

Bitcoin, Gold, TLT Rise

Other risk-on assets also increased with bitcoin climbing more than 4%. 

Traditional safe haven asset gold, which has soared over the past six months, climbed 0.6%, pushing the SPDR Gold Shares ETF (GLD) higher 1%. The yield on a 10-year Treasury also dropped lower to 4.37%.  The iShares 20+ Year Treasury Bond ETF (TLT), a bond market proxy jumped more than 1%. TLT has risen more than 2% in May with net inflows of $550 million, partly on expectations that the CPI would offer some encouraging signs. 

Read More: TLT Investors Seek Redemption in CPI Inflation

Fed to 'Hold the Policy Rate Where It Is'

After cutting interest rates for 15 months, the U.S. central bank seemed well along in achieving its goal of 2% annual inflation, raising expectations that it could reverse this monetary hawkishness. But as the CPI and other indicators have stalled, the Federal Reserve has grown increasingly cautious about cutting rates, leaving them intact since last July. 

In announcing the bank's last policy decision on May 1, the Fed reiterated its commitment to base future decisions on data showing that inflation is "moving sustainably toward 2 percent."

On Tuesday in remarks at an event in Amsterdam shortly after the release of the latest PPI, Fed Chair Jerome Powell said it's unlikely "based on the data that we have, that the next move...would be a rate hike." 

"I think it's more likely that we'll be at a place where we hold the policy rate where it is," he said.