Wall Street Rises as July Consumer Prices Ease Rate Hike Concerns
Wall Street experienced gains on Thursday as the latest consumer prices data for July offered hopeful signs that the Federal Reserve may keep interest rates unchanged next month. The consumer price index (CPI) for July rose 3.2% on an annual basis, falling slightly short of economists’ expectations of a 3.3% increase. Prices, excluding volatile components such as food and energy, increased by 4.7% over the past 12 months, compared to a 4.8% rise in the previous month.
Although the number of Americans filing new claims for unemployment benefits increased by 248,000 last week, surpassing estimates of 230,000 additions, traders remained optimistic that the Fed’s aggressive interest rate hike campaign has come to an end. Following the release of the CPI data, bets on another rate hike this year remained below 30%.
Neil Birrell, Chief Investment Officer at Premier Miton Investors, stated, U.S. inflation came in broadly as expected in July, although the year-on-year figure is a little lower than anticipated. The August number will be out before the Fed next meets in mid-September, but there is nothing in this release to suggest that they will do anything other than keep interest rates exactly where they are.
The yield on the benchmark 10-year U.S. treasury note fell to 3.98% in volatile trading after the data, easing pressure on rate-sensitive growth stocks. As a result, Amazon.com, Microsoft, and Apple saw gains ranging from 0.9% to 1.3%.
Later in the day, investors awaited comments from several Federal Reserve officials, including Philadelphia President Patrick Harker, a voting member this year.
On Wednesday, the tech-heavy Nasdaq experienced a decline, with major stocks like Nvidia falling 4.7%. However, the index has posted a year-to-date gain of approximately 32.5% on hopes of a soft landing for the U.S. economy amid the Fed’s interest rate hikes and optimism surrounding artificial intelligence.
As of 09:40 a.m. ET, the Dow Jones Industrial Average was up 335.30 points, equivalent to a 0.95% increase, at 35,458.66. The S&P 500 rose by 40.72 points, or 0.91%, to 4,508.43, while the Nasdaq Composite gained 143.56 points, or 1.05%, to reach 13,865.58.
All 11 major S&P 500 sectors advanced, with the communication services sector, which includes Meta Platforms and Alphabet, leading the gains with a 1.2% increase.
In terms of earnings, Walt Disney saw a 1.0% rise after beating Wall Street estimates for quarterly adjusted profit per share. Capri, on the other hand, surged 56.8% following the announcement that larger rival Tapestry would acquire the parent company of Michael Kors for $8.5 billion. Tapestry’s shares fell 9.1%.
U.S.-listed shares of Alibaba witnessed a 5.5% increase after the e-commerce conglomerate reported positive quarterly sales due to improved consumer sentiment.
Trade worries intensified as President Joe Biden signed an executive order on Wednesday that restricts new U.S. investment in China, specifically in sensitive technologies like computer chips, and requires government notification for investment in other tech sectors.
Advancing issues outnumbered decliners by a ratio of 4.18-to-1 on the NYSE and 2.18-to-1 on the Nasdaq.
The S&P index recorded nine new 52-week highs and one new low, while the Nasdaq saw 25 new highs and 38 new lows.
With rising hopes that the Federal Reserve will maintain interest rates at their current level, Wall Street experienced gains on Thursday. The latest consumer prices data for July showed a milder-than-expected increase, indicating that inflation may be under control. This news boosted investor confidence and led to positive movement in the stock market. Additionally, comments from Federal Reserve officials later in the day will provide further insight into the central bank’s thinking.
