While you were sleeping: Wall St moves higher on inflation, retail sales data

Wall Street climbed as investors assessed the impact of US reports showing stronger-than-expected inflation and an unexpected drop in retail sales on expectations for the pace of Federal Reserve interest rate increases this year.

A Labour Department report showed the core consumer price index rose a faster-than-expected 0.3% in January, while the year-on-year gain held steady at 1.8%. Separately, a Commerce Department report showed a surprise decline of 0.3% in US retail sales last month.

"We're trying to weigh how much each data point is going to matter," Kristina Hooper, the chief global market strategist at Invesco, told Bloomberg. "It's about building a case for the FOMC {Federal Reserve Open Market Committee]."

At the close of trading in New York, the Dow Jones Industrial Average rose 253.04 points, or 1.0%, to 24,893.49. The Nasdaq Composite Index rallied 1.9% to 7143.62, while the Standard & Poor's 500 Index gained 1.3% to 2698.63.

The US dollar fell, as did US Treasuries, with the yield on the 10-year note climbing seven basis points to 2.913% from 2.837% on Tuesday

 The WSJ Dollar Index dropped 0.7%. It has stayed around multiyear lows despite the prospect of higher interest rates and quickening US economic growth.

The dollar’s decline supported commodities by making them cheaper for overseas buyers. Oil, gold and copper all added at least 2%.

Future rate hikes
"The data have only added to concerns about how firmly the Fed will need to apply the brakes, reflected in a further jump in Treasury yields after the release of the CPI numbers," Capital Economics economist Oliver Jones said in a note.

To be sure, a stronger-than-expected increase in clothing prices bolstered the core CPI last month.

"The trend in apparel prices has in general been more down than up in the past few years," Stephen Stanley, chief economist at Amherst Pierpont Securities, told Bloomberg. "If we're going to see an uptick in inflation on a sustained basis, I don't think apparel will be one of the main sources."

Wall Street's fear gauge-the CBOE Volatility Index or the VIX-sank 22.5% to 19.35 as of 12.59pm in New York.

Shares of Bunge dropped after the company reported fourth-quarter earnings that failed to meet expectations, fuelling concern about the outlook of a company that has been eyed as a takeover target. The stock traded 3.8% weaker.

"Looking ahead, we are seeing positive signs that soy processing conditions are improving, supporting our expectation that all segments will show year-over-year earnings growth in 2018," Soren Schroder, Bunge's chief executive officer, said in a statement. "We expect a soft first quarter with improving conditions throughout the remainder of the year."

In Agribusiness, Bunge said it is "not expecting a quick turnaround," adding that "oilseed crush margins are showing signs of improvement."

Meanwhile, Bunge said it was exiting its global sugar trading business. It has "a few interested parties" that might want to acquire the business, Schroder said in an interview on Wednesday, Reuters reported.

In Europe, the Stoxx 600 Index rose 1.1%. Germany's DAX Index added 1.2%, France's CAC40 Index gained 1.1% and the UK's FTSE 100 index increased 0.6%.

Danone rises after sale
Shares of France's Danone rose 0.6% in Paris. The world's largest yoghurt maker announced plans to sell part of its stake in Japan's Yakult in an effort to satisfy demands for increased shareholder returns.

Danone will sell part of its 21.3% stake in Yakult, aiming to retain a shareholding of about 7%. That would keep Danone as Yakult's largest shareholder, it said in a statement.

"We expect that there was slight pressure from the activist Corvex, which could be the reason for this move as strategically it made no sense any more for Danone to have such a large minority holding," Alain Oberhuber, an analyst at MainFirst Bank, told Bloomberg.

Gregoire Laverne, a fund manager at Roche Brune Asset Management, which owns Danone shares, said the move was positive, Reuters reported.

"Danone is sending a strong signal," Mr Laverne said. "It is meeting its commitments for a better capital allocation. Now the question is: what will it do with the cash?"

(BusinessDesk)