Stocks Rise Despite Hotter-Than-Expected Inflation Data…..
U.S. equities finished with modest gains higher in afternoon action, with the S&P 500 notching a fresh record high, despite another hotter-than-expected read on consumer price inflation, as the report showed the biggest contributors will likely not persist. The Health Care sector led the way, along with growth-related issues such as Information Technology, as the bond and currency markets seem to take the inflation data in stride. Treasuries were slightly higher and the U.S. dollar nudged to the downside, while gold advanced and crude oil prices gained modest ground in choppy action. In other economic news, jobless claims continued to decelerate to help foster optimism of the economic recovery. On the equity front, RH topped quarterly forecasts and issued favorable guidance, while GameStop announced a new CEO and CFO, both from Amazon.com. Europe finished mixed following the U.S. data and ECB decision to keep its asset purchases ramped up even after raising its inflation and economic growth outlooks, while markets in Asia were mostly higher.
The Dow Jones Industrial Average increased 19 points (0.1%) to 34,466, the S&P 500 Index rose 20 points (0.5%) to 4,239, and the Nasdaq Composite advanced 109 points (0.8%) to 14,020. In moderate volume, 888 million shares were traded on the NYSE and 4.8 billion shares changed hands on the Nasdaq. WTI crude oil moved $0.33 higher to $70.29 per barrel. Elsewhere, the Bloomberg gold spot price increased $3.21 to $1,889.68 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% lower to 90.08.
Consumer price inflation runs hotter than expected, jobless claims continue to decelerate…..
The Consumer Price Index (CPI) rose 0.6% month-over-month (m/m) in May, above the Bloomberg consensus estimate calling for a 0.5% gain, and compared to April’s unrevised 0.8% increase. The core rate, which strips out food and energy, was up 0.7% m/m, versus expectations of a 0.5% gain and below April’s unadjusted 0.9% rise. Y/Y, prices were 5.0% higher for the headline rate, north of forecasts projecting a 4.7% increase and April’s unrevised 4.2% rise. The core rate was up 3.8% y/y, north of projections of a 3.5% gain and April’s unrevised 3.0% increase.
The U.S. Department of Labor said prices for used cars and trucks continued to rise sharply, accounting for about one-third of May’s increase in inflation, while prices for household furnishings and operations, new vehicles, airline fares, and apparel also contributed. The report did note that prices for medical care fell slightly, one of the few components to decline last month.
Weekly initial jobless claims came in at a level of 376,000 for the week ended June 5, just above estimates of 370,000 but below the prior week’s unrevised 385,000 level. The four-week moving average fell by 25,500 to 402,500, and continuing claims for the week ended May 29 dropped by 258,000 to 3,499,000, south of estimates of 3,665,000. The four-week moving average of continuing claims declined by 35,250 to 3,651,250.
Treasuries were higher following the inflation and jobs data, as the yield on the 2-year note was flat at 0.15%, while the yield on the 10-year note fell 4 basis points (bps) to 1.45%, and the 30-year bond rate declined 2 bps to 2.15%.
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