LIVE MARKETS-Boing! Cool CPI report puts a spring in Wall Street's step

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BOING! COOL CPI REPORT PUTS A SPRING IN WALL STREET'S STEP

Better-than-expected economic reports on Wednesday provided a nice trampoline for the stock market to bounce on.

Inflation data provided a refreshing gust of cooler-than-expected numbers.

The Labor Department's Consumer Price Index (CPI) USCPI=ECI, which tracks the prices U.S. consumers pay for a basket of goods and services, rose by 0.2% in February, marking an abrupt cool-down from January's hotter-than-consensus 0.5% gain and clocked in at 2.8% year-on-year, down from 3.0% the prior month.

Core CPI, which omits volatile food and energy prices - and is often referred to as "underlying inflation" - rose on monthly and annual bases by 0.2% and 3.1%, respectively.

All of which landed 0.1 percentage point below analyst estimates, right down the line.

"This is good news on the inflation front, but obviously with the imposition of tariffs, we still don't know where the real direction of inflation is at this time," Peter Cardillo, chief market economist at Spartan Capital Securities tells Reuters.

"At next week's FMOC meeting they will probably talk about this," Cardillo adds. "They'll probably say they feel comfortable that the inflation is headed in the right direction but will obviously talk about the unknown... effects of the tariffs."

This is the second major inflation indicator for February, and a welcome cool-down after last week's wage growth data, which took an unwelcome step higher.

Even so, the widening gap between wage growth and core inflation means more money in consumers' pockets, which is good news for an economy that relies heavily on consumer spending.

Here's the state of play between major inflation gauges and the Powell & Co's 2% annual target:

Line-by-line, housing fuels and utilities surged 1.2% from January, while motorists paid 1.0% less for gasoline at the pump.

Airfares provided the biggest move, dropping 4% from the previous month.

Closely-watched shelter and services prices both increased by 0.3% last month. But compared with February 2024, shelter is up 4.2% and services prices have risen 4.1% - still stubbornly hot.

"Services prices continue to rise faster than the market and the Fed want to see," says Carl Weinberg, chief economist at High Frequency Economics. "However, they are still on a gradually slowing year-over-year trend even after this report."

Separately, the cost of financing home loans inched lower last week, sparking an 11.2% jump in aggregate mortgage demand, with refinancing applications providing most of the muscle.

The average 30-year fixed contract rate USMG=ECI shaved off 6 basis points to print at 6.67%, the lowest it's been since mid-December, according to the Mortgage Bankers Association (MBA).

As a result, applications for loans to buy homes USMGPI=ECI increased by a healthy 7.0%, while refi demand USMGR=ECI surged 16.2%.

"As we enter the spring homebuying season ... activity was up across all loan categories," writes Joel Kan, MBA’s deputy chief economist. "Additionally, average loan sizes were higher, with the purchase loan amount hitting $460,800, the highest in the survey dating back to 1990."

Compared with the same week last year, the 30-year fixed rate is 17 basis points cooler. Over the same time frame, purchase demand and refi applications are up 4.7% and 89.7%, respectively.

(Stephen Culp)

FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:

U.S. STOCK FUTURES CHEER COOLER-THAN-EXPECTED CPI - CLICK HERE

EUROPEAN LUXURY IN A U.S. SLOWDOWN - CLICK HERE

WALL ST'S WOBBLES: RECESSION OR ROTATION? - CLICK HERE

BUY THE DIP, SAYS BARCLAYS ON DEFENCE - CLICK HERE

CEASEFIRE VIBES BOOST BANKS AND BUILDERS - CLICK HERE

BEFORE THE BELL: EUROPE RECOVERS, EYES ON INFLATION, EARNINGS - CLICK HERE

UKRAINE TALKS LIFT EURO BUT TARIFF WORRIES LINGER - CLICK HERE