Dow jumps 150 factors to new report after inflation report is not as dangerous as feared

Shares rose on Wednesday after inflation skyrocketed, but not quite as much as investors feared when they canceled volatile food and energy prices.

The Dow Jones Industrial Average gained around 150 points, or 0.45%, and hit a new intraday record. The S&P 500 rose 0.2% to an intraday high. The Nasdaq Composite was up 0.1% as rates gave up on gains.

The 10-year government bond yield flattened after the report, giving up a previous gain and trading around 1.344%.

The consumer price index for July, released on Wednesday, showed a price jump of 5.4% since last year, compared to expectations of 5.3%, according to economists polled by Dow Jones. The government said the CPI rose 0.5% month on month in July.

But investors focused on core inflation. The CPI excluding energy and food prices rose 0.3% last month, below the expected increase of 0.4%. Core prices were still up 4.3% year over year.

“It is encouraging to see the pace slowing down a bit from month to month, which supports the notion that the recent price hikes are temporary and related to the reopening. So while inflation continues to run hot, it’s likely that investors are already pricing it in, ”said Mike Loewengart, managing director of investment strategy at E * TRADE Financial.

Used car prices, viewed by investors as a sign of inflation spiraling out of control, rose just 0.2% in July after rising more than 10% in the previous month.

The data “should help allay investor fears that the Fed is too relaxed on inflationary pressures,” said Seema Shah, chief strategist at Principal Global Investors. “The details of the data release suggest some easing of the reopening and price hikes driven by supply scarcity, and preliminary suggests that inflation may have peaked.” Investors in the transition period will easily feel confirmed. “

Oil prices fell Wednesday after the White House urged OPEC and its allies to increase oil production to aid global recovery from the pandemic. West Texas Intermediate’s crude oil futures contracts fell more than 1% to about $ 67.44 a barrel. The European benchmark Brent crude also slipped more than 1% to around USD 69.85 a barrel.

Southwest Airlines shares were down 2% after lowering their third-quarter operating earnings forecast, citing the Delta variant. American Airlines and United Airlines also slipped after the opening bell.

On Tuesday, the Dow and S&P closed at record highs after the Senate passed the $ 1 trillion infrastructure bill. The law provides for $ 550 billion in new spending on areas such as transportation and the electricity grid. The Nasdaq Composite lost 0.49% on Tuesday, posting its second negative trade in the last three. The decline came as government bond yields rose and weighed on growth-oriented areas of the market.

The march to record highs for stocks comes despite rising Covid cases in the US and around the world.

“The widespread distribution of vaccines and distancing measures have helped limit the impact of the variant, but we could still hold back economic growth as some restrictions are reintroduced and consumers may become more cautious,” said Barry Gilbert, asset allocation strategist at LPL Financial. “While we can see an increase in market volatility due to the delta variant, we believe the S&P 500 will continue to make gains through the year end,” he added.

The winning season continues on Wednesday, with Wendy’s and Canada Goose among the names to report before the opening bell. Lordstown Motors, eBay and Bumble are on deck after hours.

As of Friday, 87% of the S&P 500 companies that released quarterly results had beat earnings estimates. The same percentage of companies beat sales estimates over this period.

“There has been a lot to consider in the past few weeks: big earnings, a restrictive Fed and some mind boggling economic data,” said Craig Erlam, senior market analyst at Oanda. “Everything it seems now indicates that the Fed will be scaling back its bond purchases in the coming months, with Delta being the only things that could possibly stand in its way if they spread to the US (and many other countries) . “

Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Sign in to start one Try it for free today

– with reports from Yun Li of CNBC.

Comments are closed.