Stocks rebound on hope inflation is peaking

U.S. stock futures rose as the March consumer prices report showed inflation excluding food and energy costs was slightly less than expected.

Futures on the Dow Jones Industrial Average gained 119 points or 0.3% following the report. S&P 500 futures ticked upward by 0.7%. Nasdaq 100 futures climbed 1.3%.

Consumer prices for March increased 1.2% month-to-month and 8.5% annually, the Labor Department said on Tuesday. But traders were focusing on the core reading, which excludes volatile food and energy prices. Core CPI in March increased 0.3%, below the consensus economist estimate from Dow Jones of 0.5%. Core prices on an annual basis were up 6.5%.

The 10-year Treasury yield retreated from a three-year high following the report as traders were betting the core reading could mean inflation is showing signs of peaking.

“I think by the summer we’ll probably see the CPI inflation rate peaking and then the consumption deflator is going to peak somewhere between 6 and 7% and then come down to maybe 3 to 4% by the second half of the year going into next year,” Ed Yardeni, president of Yardeni Research told CNBC’s “Closing Bell: Overtime” on Monday.

The recent spike in U.S. inflation has helped increase expectations of tighter monetary policy from the Federal Reserve. The Fed raised rates at its March meeting, and it’s expected to hike more throughout the year.

The 10-year Treasury yield fell more than 6 basis points to 2.717% following the CPI reporter after earlier touching 2.801% a level not seen in more than three years. (1 basis point equals 0.01%).

Oil prices jumped Tuesday morning with the international benchmark Brent crude jumping 4.3% to $102.74 per barrel. Meanwhile, West Texas Intermediate crude futures gained 4.1% to $98.17 per barrel.

Along with March CPI, investors are awaiting the start of earnings season set to kick off Wednesday with JPMorgan and Delta Air Lines, followed by several big banks on Thursday.

Wall Street was coming off a downbeat session, with the Dow and S&P 500 each falling more than 1%, while the Nasdaq dropped more than 2%.

The recent spike in U.S. inflation has helped increase expectations of tighter monetary policy from the Federal Reserve.