Michael M. Santiago
U.S. stocks rose on Thursday, as sentiment was boosted by further data on inflation that showed more moderation.
By late afternoon, the Nasdaq Composite (COMP.IND) had advanced 1.33% to 14,103.71 points. The tech-heavy gauge was helped by a 4% advance in shares of Alphabet (GOOG) (GOOGL), after its Google unit launched its artificial intelligence chatbot Bard in Europe and Brazil. Amazon (AMZN) also gave a boost as its popular Prime Day shopping event set a sales record.
The benchmark S&P 500 (SP500) rose 0.64% to 4,500.97 points, while the Dow (DJI) underperformed the other two averages with a 0.13% gain to 34,393.21 points. The blue-chip index was weighed down by Walgreens Boots Alliance (WBA) and Chevron (CVX).
Of the 11 S&P sectors, nine were trading in the green, led by heavyweight growth areas Communication Services and Technology. Energy and Health Care were the two losers.
Investors took heart from the producer price index (PPI) report released earlier in the day. The headline number for June edged up 0.1%, lower than the expected increase of 0.2%. Core PPI – which excludes food and energy – also came in at +0.1% compared to an expectation of +0.2%.
The soft PPI numbers come a day after the closely watched consumer price index (CPI) came in cooler than anticipated. The inflation data has led to investors upping their bets that the Federal Reserve would have to end its rate-hiking campaign.
“Markets have put in a very strong performance over the last 24 hours, thanks to a promising U.S. CPI report that boosted hopes of a soft landing in the markets’ eyes,” Deutsche Bank’s Jim Reid said.
“There were several details that investors liked, but a key one was that it marked the first time in 29 months that the monthly core inflation print had been beneath 2% on an annualized basis. So the Fed would be very happy if we got some more reports like yesterday’s, and markets moved to price in more rate cuts for next year as a result,” Reid added.
According to the CME FedWatch tool, markets have brought forward chances of a rate cut to January 2024 from March.
Treasury yields continued to fall following the PPI report. The longer-end 10-year yield (US10Y) was down 9 basis points to 3.77%, while the more rate-sensitive 2-year yield (US2Y) retreated 13 basis points to 4.61%.
Thursday’s economic calendar also showed a fall in the number of Americans filing for initial jobless claims the past week, pointing to continued resilience in the labor market.
Though the spotlight was largely dominated by the data on inflation, there was also some attention on the start of the second quarter earnings season. Market participants parsed strong results from number one U.S. carrier Delta Air Lines (DAL) and beverage giant PepsiCo (PEP). Friday will see reports from major banks including bellwether JPMorgan (JPM).
Looking at active movers, Exxon Mobil (XOM) was among the top percentage losers on the S&P 500 (SP500) after the oil major said it would buy Denbury (DEN) in an all-stock deal valued at $4.9B.
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