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Market Snapshot: S&P 500 and Dow touch intraday records after CPI matches expectations

U.S. stock benchmarks climbed further into record territory Wednesday after a report on consumer inflation mostly matched expectations.

How are markets trading?
  • The Dow Jones Industrial Average
    DJIA,
    +0.48%

    rose 143 points to 35,408, a gain of 0.4%, exceeding an intraday high at 35,285.16.
  • The S&P 500 index
    SPX,
    +0.03%

    was trading 0.2% higher, up 8 points, at 4,444, after establishing an intraday record at 4,449.32.
  • The Nasdaq Composite Index
    COMP,
    -0.57%

    climbed 17 points, or 0.1%, to 14,806, weighed by relatively elevated Treasury yields.

On Tuesday, the Dow rose 162.82 points, or 0.5%, to close at 35,264.67, the S&P 500 gained 4.40 points, or 0.1%, to end at 4,436.74, with the Nasdaq Composite moving the other way, closing down 72.09 points, or 0.5%, to 14,788.09.

What’s driving markets?

Stocks edged higher Wednesday after the Labor Department reported the July consumer-price index rose 5.4% in July from a year earlier, as price measures of food, energy, shelter and new vehicles rose, while costs of used cars, airfare and auto insurance retreated. The reading was about in line with data on June and slightly lower than some predictions for 5.5%.

The government said the July CPI increased 0.5% for the month, also matching expectations, while the core rate, excluding volatile food and energy prices, rose by 0.3%, below expectations of a 0.4% increase, according to average estimates of economists polled by Dow Jones.  The 12-month core rate decelerated to 4.3% from 4.5%, which was a 29-year high.

Key members of the rate-setting Federal Open Market Committee, including Chairman Jerome Powell, have said that they see inflation’s rise amid the COVID pandemic as a short-term phenomenon and some may take the most recent report on inflation as affirming that view.

“No big surprise on the inflation front this morning, but it’s encouraging to see the pace moderating a bit month over month supporting the notion that recent price increases are transitory and reopening related,” wrote Mike Loewengart, managing director investment strategy at E-Trade Financial, in emailed remarks on Wednesday.

That said, some analysts said that the market is also is focused on the health of the jobs market and wages as the recovery in the jobs market is a key mandate for the Fed.

“Ultimately, I would not see this as a narrative-changer for the Fed and the timing of its tapering,” wrote Neil Wilson, analyst at Markets.com in a report following the inflation reading.

“Of course there is ever-present problem for the Fed in trying to balance employment with inflation—real wages, which are declining,” Wilson wrote.

The inflation report comes a day after the Dow and S&P 500 each logged record closes on Tuesday, as investors looked past worries surrounding economic growth and the fast-spreading delta variant of coronavirus. They instead cheered news that the Senate passed a $1 trillion infrastructure bill, sending it to the House of Representatives for its approval.

Read: Stocks and sectors that stand to benefit from $1 trillion infrastructure bill

The yield on the 10-year government bond
TMUBMUSD10Y,
1.357%

was up 1 basis points to 1.35% early Wednesday.

Which companies are in focus?
  • Shares of Coinbase Global Inc.
    COIN,
    +6.72%

    rose 4% in premarket trading. In its first report as a public company, the cryptocurrency platform reported sales and profit that beat forecasts, though also a tepid third-quarter outlook.
  • Chesapeake Energy Corp. CHK, said Wednesday it has reached an agreement to acquire Vine Energy Inc. VEI in a zero-premium cash-and-stock deal valued at about $2.2 billion.
  • Wendy’s Co. WEN stock rose in Wednesday trading after the burger chain reported second-quarter earnings that beat expectations.
  • Perrigo Co. PLC shares PRGO slid about Wednesday, after the Dublin, Ireland, based consumer self-care company swung to a loss for the second quarter and lagged behind consensus estimates.
  • Southwest Airlines Co. shares LUV slid Wednesday, after the airline said slowing bookings and an increase in cancellations in August driven by the delta variant of the coronavirus means it is unlikely to be profitable in the third quarter.
How are other assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y rose less than a basis point to 1.35%. Yields and debt prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, fell 0.1%, a day after hitting its highest level since March.
  • Oil futures headed lower, with the U.S. benchmark CL00 down 0.9% at $67.68 a barrel as the Biden administration said it would press the Organization of the Petroleum Exporting Countries and its allies to further boost output. Gold futures GC00 edged higher, rising 0.9% to trade at $1,747.60 an ounce.
  • In European equities, the Stoxx Europe 600 SXXP rose 0.4% and London’s FTSE 100 UKX traded 0.6% higher.
  • Asian equities rose, with the Shanghai Composite SHCOMP up less than 0.1%, Hong Kong’s Hang Seng Index HSI advancing 0.2%, while Japan’s Nikkei 225 NIK climbed 0.7%.

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