S&P 500 regains composure, rises as fears wane and US CPI ticks lower

• The S&P 500, the Nasdaq 100, and the Dow Jones advanced as traders prepared for US Retail Sales.
• US inflation cooled on a yearly basis, but on a monthly basis, core CPI advances.
• Investors are expecting the Federal Funds Rate to peak around 5%.

Wall Street is trading with solid gains, recovering after Monday’s volatile session sponsored by the US regional bank crisis, threatening to spread to other banks. However, the measures to contain the collapse of Silicon Valley Bank (SVB) appeared to cushion risk assets fall.

At the time of typing, the S&P 500 is gaining 0.72, at 3,883.55. Following suit is the heavy-tech Nasdaq 100, up 1.20% at 11,322.69, while the Dow Jones raises 0.22%, at 31,891.57.

US equity indices and UST bond yields gain traction, and the US Dollar falls

Despite the current bank crisis, the latest economic data from the United States (US) would likely keep the US Federal Reserve (Fed) in a tightening mode. US inflation in the US came pretty much aligned with estimates, though on a monthly basis, the core Consumer Price Index (CPI) for February aimed for 0.5%, above forecasts of 0.4%. Headline inflation, the CPI, was 0.4% MoM, aligned with estimates. Annually based inflation data, in general, and core, was below estimates, showing the effect of higher interest rates.

In the meantime, expectations for a 25 bps rate hike by the Federal Reserve (Fed) remained elevated. Nevertheless, developments around the latest banking crisis in the US could influence Fed officials’ decisions next Wednesday. The CME FedWatch Tool odds for a 25 bps hike lie at 65% to the 4.75% - 5.00% range.

Sector-wise, Communication Services, and Financials are the two leaders of the pack, up 2.13% and 1.76%. The laggards are Consumer Staples and Real Estate, each up 0.16% and 0.11%.

Of late, geopolitical concerns over a Russian aircraft crashing with a US drone exacerbated the newest dip in US equities.

US Treasury bond yields are recovering, led by 2s and 10s, each up 7% and 1.76%, respectively. The US Dollar Index (DXY) pairs some of its earlier gains and slides 0.04%, at 103.581.

What to watch?

The US economic calendar will feature February Producer Price Index (PPI) and Retail Sales. The New York Empire State Manufacturing Index for March and the NAHB Housing Market Index would also be revealed.

S&P 500 Daily chart