U.S. stocks were slightly higher Thursday afternoon, after the S&P 500 index and Nasdaq Composite briefly turned negative, as investors gauged if July’s report on consumer prices could spell the end of Federal Reserve interest rate hikes.
- The Dow Jones Industrial Average DJIA was up 106 points, or 0.3%, to 35,229.
- The S&P 500 SPX rose 6 points, or 0.1%, to 4,474, after briefly turning negative.
- The Nasdaq Composite COMP gained 23 points, or 0.2%, to 13,745, after also briefly trading in the red.
The S&P 500 has declined six of the last seven sessions as stocks have seen a rocky start to August, but both the S&P 500 and Dow managed to shake off losses from earlier in the week as they fought to avoid a second straight weekly decline.
What’s driving markets
Stock prices were volatile Thursday after the monthly U.S. inflation reading spurred hopes that the Federal Reserve might be close to ending its rate hiking campaign.
U.S. consumer prices rose by 0.2% in July on both a headline and core basis, with the latter excluding food and energy prices. Both measures were in line with economists’ expectations.
On a year-over-year basis, headline prices rose by 3.2%, less than the 3.3% forecast by economists polled by The Wall Street Journal, but higher than the 3% reading from the prior month, and it was the first reacceleration in 13 months. Meanwhile, the increase in core inflation, excluding food and energy prices, over the past year slowed to 4.7% from 4.8%, the lowest rate in almost two years.
Investors were assessing whether the inflation data might mean the Fed may be done hiking interest rates after bringing its policy rate to a 22 year high.
“The Fed is more likely to make one last rate hike this year to make sure inflation stays low than to hold rates where they are now, then probably pivot to cuts in early 2024,” said Bill Adams, chief economist for Comerica Bank, in emailed commentary.
After stocks rallied in response to the inflation data, the S&P 500 briefly briefly turned negative during the session when Francisco Fed President Mary Daly said there’s “more work to do,” even though the latest data showed inflation coming down.
“Overall, the underlying details of the July CPI inflation data are consistent with ongoing progress on disinflation,” said Gurpreet Gill, global fixed income macro strategist at Goldman Sachs Asset Management, in emailed commentary.
Traders now see less than a 10% chance of a September rate rise by the Fed after the CPI data but down from more than 20% a week ago, according to the CME’s FedWatch tool.
Still, a team at Citigroup Inc. worry rising energy prices could potentially cause inflation to reaccelerate later this year. West Texas Intermediate crude for September delivery CLU23, -1.78% settled at $84.40 a barrel on the New York Mercantile Exchange on Wednesday, its highest level of 2023.
In other economic news, the latest reading on unemployment claims showed the number of Americans applying for unemployment benefits increased last week by 21,000 to 248,000.
Treasury yields, which have been in focus for stocks lately, were little-changed on the day in recent trade as an initial knee-jerk decline after the release of the CPI data faded.
The yield on the 10-year Treasury note BX:TMUBMUSD10Y jumped to 4.08% after falling as low as 3.95% shortly after the inflation data were released at 8:30 a.m. Eastern Time.
The U.S. dollar also edged up in afternoon trade, with the ICE U.S. Dollar Index DXY up less than 0.1% at 102.52.
Companies in focus
- Walt Disney Co. shares DIS, +5.65% rose after the media giant reported a mixed third-quarter and said it would raise prices on almost all of its streaming packages in an aggressive push to boost profit.
- Capri Holdings shares CPRI, +55.59% jumped after Tapestry TPR, -16.43%, the owner of Coach, announced a deal to buy the company, the parent company of Michael Kors, Jimmy Choo and Versace.
- Plug Power Inc. stock PLUG, -16.33% dropped after the alternative-energy company saw losses for the second quarter increase more than Wall Street expected.
- Alibaba Group Holding Ltd. BABA, +4.09% shares rose after the Chinese e-commerce giant topped expectations with its latest revenue and earnings.
- Roblox Corp. RBLX, +3.50% shares rose modestly, paring some of a post-earnings decline.
––Steven Goldstein contributed reporting to this article.