Wall St rally after inflation data fades; Fed minutes on tap

U.S. stock indexes gave up most of their gains on Wednesday as investors reassessed the outlook for U.S. monetary policy following inflation data, while focus shifted to minutes from the Federal Reserve’s March meeting.

Stock futures rallied close to 1% and Treasury yields slid after data showed U.S. consumer prices barely rose in March as the cost of gasoline declined.

However, the major benchmarks shed gains quickly, briefly turning lower, as investors focused on underlying inflation pressures which rose in line with economists’ estimates.

“The initial reaction was overdone in the sense the beat was on the headline number which is not where the Fed is focused, obviously it’s the core number that matters” said Michael O’Rourke, chief market strategist at JonesTrading.

“We’re still running well above the Fed’s 2% inflation target.

Money market participants largely stuck to bets that the U.S. central bank will hike rates by 25 basis points next month, according to CME Group’s Fedwatch tool.

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