The U.S. stock market closed higher yesterday after the July consumer price inflation report came in cooler than expected. For a quick market update, download the free Schwab Market Update podcast. You’ll learn how the market responds to a variety of economic reports. In this article, we’ll take a look at the S&P 500, Nasdaq, and Dow. We’ll also look at why the DJIA is on the move.
S&P 500
The S&P 500 and Dow Jones Industrial Average are soaring on Wednesday after the Labor Department’s consumer price index report came out lower than expectations. The consumer price index rose 8.5% in July from a year ago and 0.5% from June. The report showed that prices were moderating and may have fallen below the early 2021 level, which is a sign of “peak inflation” for investors. Federal Reserve officials may now be slowing interest rate hikes, and the S&P 500 is leading the way.
Core CPI, which excludes energy and food, is expected to rise to 6.1% in September from 5.9% in June. This is good news for investors as it indicates a more dovish Fed. Despite the worries of recession, the Fed has already raised its policy rate twice this year, by a quarter-point each, to a total of five times. The S&P 500 has gained more than 15% from mid-June lows on expectations that the Fed will become less hawkish on future interest rate hikes.
A key factor for the short-term markets will be the July consumer price index. The July CPI will show whether the Fed is tightening its policy, following Friday’s blowout job report. While headline inflation has declined, the core CPI, which excludes food and energy, is expected to remain steady or slightly lower. Shelter prices will have an upward influence in coming months and temper the downward trend.
Small-cap stocks were the winners in Monday trading. Solar and electric-vehicle stocks saw a boost from potential spending on clean energy. Interest rates were broadly lower on the day, with the 10-year Treasury yield dropping below 2.8%. After the report was released, stocks rallied across Europe and Asia. While Asian markets ended lower, the S&P 500 rose sharply in reaction to the CPI report.
Nasdaq
The S&P 500, Dow Jones Industrial Index and Nasdaq all rose on Wednesday as investors cheered the release of the latest CPI report. The report showed that annual inflation is slowing, and investors are hoping that this will signal the end of the Fed’s rate-hike cycle. Meanwhile, bond yields fell after the CPI report, with the 10-year T-note down -5 basis points to 2.16 percent.
Despite this latest news, there are still many questions about how the Fed will react. While it is unlikely that the Fed will take a pause in its rate-hiking cycle this time, the Fed is likely to continue raising interest rates as long as the labor market remains strong. If the labor market remains strong, the Fed may have enough cover to raise rates, while also avoiding a short-term recession.
In the wake of the report, investors are focusing on a few factors. First, the overall CPI rose 0.5% in December, a slight drop from the previous month’s 0.8% increase. Second, Fed Chairman Powell’s comments about a tighter monetary policy helped bolster the market. Powell said that tightening monetary policy was necessary to keep prices in check. The Fed plans to end its monthly asset purchases in March and start raising interest rates. Three rate hikes are expected by the end of 2022, with some experts predicting more.
The Dow Jones Industrial Average rose 480 points Wednesday as investors cheered the latest consumer price index report. The S&P 500 advanced 1.7% and the Nasdaq Composite rose more than 2%. The rise in the consumer price index was a positive sign for investors, as it suggests that inflation may have peaked. So, if you are looking to buy a stock, now may be the time to buy.
This report is important for investors because it signals that the Federal Reserve is still on track to raise interest rates again this year. If the Fed pauses its rate hike, they may have to slow their pace of tightening. That said, the market might need a short respite, which could be a positive sign for leading stocks. The next few days will give investors a chance to see whether the Fed will continue tightening its monetary policy.
Dow
The Dow Jones Industrial Average rallied on Wednesday following the July consumer price inflation report. The report, which was much better than expected, signaled that inflation is finally moving in the right direction. This helped ease investor worries about the prospect of further rate hikes from the Federal Reserve. The market’s futures rose in response to the report. One of the leading stocks to climb was Disney, which soared 6.7% in late trading after posting better-than-expected subscriber numbers and beating earnings estimates.
The Consumer Price Index (CPI) report released by the Labor Department on Wednesday disappointed market participants. This was slightly below the consensus estimate of 8.7%. While the headline rate was 8.5% higher than a year ago, it was less than the expected 0.5% increase. The Core CPI, which strips out food and energy prices, rose 0.3% m/m.
The labor market
The labor market has been holding up against inflation, but not enough to trigger the Fed to take action. This has triggered a broad rally on Wall Street, with all 11 sectors in the S&P 500 making gains. While value stocks and semiconductors were weaker than the rest of the market, Dow transports soared. In addition to the majors, small caps and value stocks also rallied. If the Fed does act, the markets will likely move in the opposite direction.
The Federal Reserve’s expectations for the September rate hike are likely to remain unchanged despite the low inflation reading. The Fed has been looking for “significant progress” in fighting inflation, and the report did not meet those expectations. The strong labor market likely gives the Fed cover to raise rates without risking a short-term recession. But the Fed will not make any changes to its policy until it sees that it is getting inflation under control.
Apple (NASDAQ: AAPL) is trading higher by 1.64% and Microsoft (NASDAQ: MSFT) is up by 2.18%. Other notable stocks to make moves on Wednesday include 3M Co. (NYSE: MMM) and Caterpillar, Inc. (NYSE: CAT). Moreover, American Express Co. (NYSE: AXP) and JPMorgan Chase & Co. (NYSE: JPM) are also trading higher.
DJIA
The Dow Jones industrial average rose 500 points on Wednesday, as investors cheered an encouraging consumer price index report. Inflation fell to 8.5%, near a four-decade high. Bond prices rose, too. Bond prices are an important feeler for upcoming interest rate increases. A deceleration in consumer prices likely will help the Fed avoid a surprise increase in rates, boosting the market. However, it’s worth remembering that the Fed’s decision to hike interest rates might not have such a positive impact on the economy.
The CPI report showed that inflation cooled slightly in July, but prices still rose by 8.5% between July and June. The news helped stocks bounce, but investors should not ignore the fact that this inflation isn’t going away anytime soon. The Federal Reserve is expected to raise rates again in September, and it is crucial that prices remain under control. This may explain the rally in the stock market. After all, inflation is the Fed’s primary concern.
CPI report
After the CPI report, investors cheered the fact that inflation is still holding steady compared to the labor market. But it’s not enough to trigger a rate hike, and the market could get stuck in a tight range for some time. The selling in semiconductors and chip stocks has been problematic for the market, but the rally in the Nasdaq was broader-based, with the DJIA and S&P 500 sectors all rallying.
The Dow Jones Industrial Average rose 513 points, or about 1.6%, while the S&P 500 gained 1.7%, and the Nasdaq Composite advanced by more than 2%. The markets are reacting to the consumer price index report on Wednesday. The headline CPI will show that headline inflation slowed to a more moderate pace, which should be welcomed by consumers. However, the Fed will focus on the core CPI, which excludes food and energy prices. The upward influence of shelter prices in the coming months could temper the rate of decline.
On Wednesday, the Labor Department released its consumer price index report. The overall figure for July rose 8.7% y/y, which was lower than the 0.2% consensus estimate. The core CPI, which strips out food and energy, rose 0.3% m/m, which fell short of the consensus estimate of 0.5%. The headline CPI was 8.5% higher than the year ago level, but a lower figure than expected was offset by increases in food and shelter prices.Visit here