S&P 500 rallies back bove 50DMA and to 4,450 area amid investor relief post-not as hot as feared US CPI

• Major US equity indices were higher across the board on Tuesday as investors breathed a sigh of relief post-US CPI.
• Core measures weren’t as hot as feared, allowing yields to pull back and tech to lead the US equity recovery.
• The S&P 500 was last up nearly 1.0% in the 4,450 area.

Major US equity indices were higher across the board on Tuesday as investors breathed a sigh of relief after US Consumer Price Inflation (CPI) data revealed price pressures rising broadly in line with expectations in March. Though the headline rate of annual CPI hit a four-decade high at 8.5%, core measures came in lower than expected, which investors interpreted as easing pressure on the Fed to lift interest rates as high in the coming years.

As markets dialed down their hawkish Fed bets, US yields have dropped across the curve, leading to outperformance in yield-sensitive tech/growth stocks. As a result, the Nasdaq 100 is the best performing of the major US indices, trading up about 1.4% in the 14,200 area after Monday’s sub-14,000 close, though is still below its 50-Day Moving Average at 14,320.

Meanwhile, the S&P 500 currently trades with gains of about 1.0% just above the 4,450 mark and is back above its 50DMA at 4,425 after closing near 4,410 on Monday. The Dow is trading 0.8% higher near the 34,600 level where it probes its 21DMA, having also rebounded back to the north of its 50DMA in the 34,2300s.

Sectors that typically don’t perform as well in an environment of falling yields (financials) and risk-on (health care) are acting as a slight weight to the Dow, though big gains in energy names after WTI lept back above $100 per barrel is more than offsetting this. Looking ahead, attention returns to the topic of inflation on Wednesday with the release of March Producer Price Inflation figures, though investors will likely be much more focused on earnings, with big US banks unofficially kicking off the earnings season.