Dow up 200 points as stocks hit 3-month highs on optimistic inflation data

US stocks traded to fresh three-month highs on Thursday after another set of July data suggested inflation could be easing, but remained below the day’s best levels in afternoon trade as major tech stocks lagged.

How are the stocks doing?
  • S&P 500 SPX,
    +0.01%
    rose 23 points, or 0.6%, to 4,234.

  • Dow Jones Industry Average DJIA,
    +0.16%
    rose 195 points, or 0.6%, to 33,504.

  • Nasdaq Composite COMP,
    -0.49%
    added 17 points, or 0.1%, to 12,872.

On Wednesday, the Dow Jones Industrial Average was up 535 points, or 1.63%, to 33310, the S&P 500 was up 88 points, or 2.13%, to 4210, and the Nasdaq Composite was up 361 points, or 2.89%, to 12855. The S&P 500 is 14.8% above its 2022 closing low hit in mid-June, but remains down 11.7% to date.

What moves the markets

Stocks rose to their highest levels since early May after the producer price index fell 0.5% in July, compared with an expected 0.2% rise, even as the top three US stock benchmarks extended gains on the way to the Afternoon trading in New York has scaled back somewhat.

See: US producer price inflation moderated in July

Thursday’s upbeat inflation report followed a similarly cooler-than-expected US CPI reading a day earlier. This data also helped stocks soar, with the Nasdaq exiting the bear market and the Dow exiting correction territory.

Hopes that inflation had peaked helped investors return to stocks as they believed slowing inflation could allow the Federal Reserve to raise interest rates less aggressively.

“While a number certainly does not represent a trend, the drop in wholesale prices could indicate supply chain congestion is improving,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “Overall, the data, combined with the CPI data earlier this week, is a welcome sign that we may be nearing or may have peaked in inflation. However, we would like to warn that while we are improving the trend, we still have a long way to go to get back towards 2% inflation.”

However, some market analysts are cautioning, as rising housing costs could keep core inflation high, even as a fall in oil prices and other commodities has helped lower inflation expectations.

See: Don’t be fooled by a fall in US headline inflation. Markets are set to a different number on Wednesday

“We think this is a rally that really deserves close scrutiny because when we think about what has happened since the mid-June low, the market outlook hasn’t really changed,” said Jake Jolly, senior investment strategist at BNY Mellon Investment Management.

“Historically, the Fed has delivered more rate hikes than the market expects. And this is clearly a wandering cycle that is far from over,” said Jolly.

The second quarter earnings season also helped support the market. Walt Disney Co.
DIS,
+5.07%
Shares rose 5.8% after the media and entertainment giant reported stronger-than-expected subscriber numbers for the most recent quarter, along with earnings and revenue that beat expectations.

As companies that make up 91% of the S&P 500’s market cap reported revenue growth was 15.1% and earnings growth was 7.9% — a surprising up 3.5% and up 3.6%, according to Evercore ISI.

However, the recent rise in stocks may have overextended the market and made it vulnerable to a pullback. The CBOE Vix Index VIX,
+4.71%,
an options-based indicator of the S&P 500’s expected volatility, has fallen below its long-term average of 20, suggesting traders are getting a little complacent.

Additionally, the S&P 500’s 14-day relative strength index, a closely watched momentum gauge, is around 74, with any reading above 70 considered overbought territory. The RSI for the market giant Apple AAPL,
-0.34%
is 76, the highest since December.

In other news on economic data, initial jobless claims rose 14,000 to 262,000 for the week ended August 6, as weekly data continued to show a rising number of Americans filing for unemployment benefits — even as the unemployment rate rose to 3.5% last month went back. .

See: US jobless claims rise, ‘cool breeze’ over hot job market

company in focus
  • shares of GSK SPS
    GSK,
    -7.22%,
    Haleon PLC
    HLN,
    -4.90%
    and Sanofi
    san,
    -3.33%
    fell amid controversy over severe side effects caused by heartburn drug Zantac. shares of Pfizer Inc. PFE,
    -3.65%
    fell more than 3%

  • Six Flags Entertainment Corp.
    SIX,
    -20.38%
    Shares fell more than 21% after the theme park operator reported its second-worst performance in its 12-year public history after a major miss in attendance led to a surprise fall in second-quarter revenue

  • Canada Goose Holdings Inc.
    WELL,
    +0.94%
    Shares rose 1.3% after the company reported higher-than-expected earnings that offset a bigger-than-expected loss.

  • shares of Utz Inc.
    news,
    -2.36%
    Soared 0.5% after the savory snack maker beat Wall Street’s adjusted net income and sales targets and raised its guidance for fiscal 2022 organic net sales by 2%.

  • Warby Parker
    WRBY,
    +19.15%
    Shares rose nearly 20% after reporting a narrower-than-expected loss for the second quarter.

How are other assets doing?

— Jamie Chisholm contributed to this article.

https://www.marketwatch.com/story/u-s-stock-futures-rally-to-three-month-high-amid-peak-inflation-optimism-11660207655?rss=1&siteid=rss Dow up 200 points as stocks hit 3-month highs on optimistic inflation data

Brian Lowry

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