Dow Jones, S&P and Nasdaq close at record highs after consumer price index shows inflation slowing down

Each of the major U.S. stock indexes closed at record highs Wednesday after new federal data showed inflation slowing.

The Dow Jones Industrial Average, S&P 500 fell after the Labor Department reported that inflation fell to an annual rate of 3.4% in April after a 0.3% monthly price increase, according to the Consumer Price Index (CPI). The index, the Nasdaq Composite Index, rose on Wednesday.

The Dow Jones Industrial Average rose about 350 points on Wednesday, closing at $39,908, up 0.9%. The S&P rose 1.2% and the Nasdaq rose 1.4%.

After months of higher-than-expected inflation, the slowing rate of price growth is welcome news for Wall Street. According to forecasts released in December, Fed officials had expected to cut interest rates as early as this spring, but held off as both job growth and inflation remained challenging.

If inflation continues to fall, the Fed may be more inclined to lower interest rates and ease the brakes on the economy. Lower interest rates tend to stimulate stock markets because businesses have less money to spend on debt costs and consumers have more money to spend.