Dow industrials rise more than 400 points after CPI shows U.S. inflation cooling

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U.S. stock indexes opened higher on Wednesday, after the July U.S. consumer-price index report showed a slowdown of headline inflation from June, primarily thanks to falling energy prices.

How are stock indexes trading
  • The Dow Jones Industrial Average DJIA, +1.53%  gained 441 points, or 1.4% to around 33,204
  • The S&P 500  SPX, +1.77%  advanced 70 points, or 1.7% to 4,192
  • The Nasdaq Composite COMP, +2.30% rallied 286 points, or 2.2% to 12,772

On Tuesday, the Dow Jones Industrial Average fell 0.2% to 32774, the S&P 500 declined 0.4% to 4122 — its fourth-straight losing session — and the Nasdaq Composite dropped 1.2%, to 12493, its third consecutive drop.

What’s driving markets

The July U.S. consumer-price index (CPI) report released at 8.30 a.m. Eastern showed a cooling headline inflation and a sticky core inflation.

The consumer price index was unchanged in July, compared with the 1.3% gain in the prior month, according to the Labor Department. Economists polled by The Wall Street Journal had estimated a 0.2% gain in July.

The rate of inflation in the 12 months ended in July slowed to 8.5% from a 41-year high of 9.1% in June.

The closely-watched core measure of inflation that omits volatile food and energy prices rose 0.3% in July, a slower pace from a 0.7% gain in the prior month. The 12-month rate remained steady at 5.9%.

See: U.S. consumer price inflation surprises to downside in July

Investors have been eager to see that inflation has peaked. Equities have been roiled in 2022 but despite bouncing off its mid-June low, the S&P 500 index remains down 13.5% for the year to date. The drop has been driven by fears that multidecade-high inflation will batter consumer confidence, cause the Federal Reserve to hike borrowing costs aggressively and tip the U.S. economy into recession.

“If this is truly the peak in inflation, this could officially signal an economic tide shift that both consumers and investors can appreciate,” Rusty Vanneman, chief investment strategist at Orion Advisor Solutions wrote in a Wednesday note. “That said, the absolute level of inflation remains painfully high and the risk of being a false peak remains, especially given that two important drivers of inflation are still troublesome: wages and housing.”

After the inflation report was released, the dollar index DXY, -1.49% was down 1% to 105.28 and U.S. 10-year Treasury yields TMUBMUSD10Y, 2.737% eased 7.9 basis points to 2.705%.

Damping sentiment is a recent rash of poorly-received corporate news. There is particular concern about the health of the semiconductor sector after Micron MU, +1.72% followed Nvidia NVDA, +2.80% with a warning about revenues. The PHLX Semiconductor Index SOX, +2.39% is down 26% so far in 2022.

In addition, a recent rally in badly battered former bull market darlings has come to a juddering halt in the past few sessions, also hurting retail investor confidence. And some are due for more pain on Wednesday.

Roblox RBLX, -6.27%, the videogame group, lost 4% after a key sales metric declined for the second consecutive quarter.

Companies in focus
How are other assets faring

This article was originally published by Marketwatch.com. Read the original article here.

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