Equities Mixed as Inflation Slows…..
U.S. stocks closed mixed after July’s consumer price inflation report suggested that inflation remains elevated but showed signs of moderation. Nearly all sectors gained ground, as lingering Delta variant uncertainty was countered by progress on a trillion dollar infrastructure spending package. However, Healthcare issues struggled as the only sector to close in the red. In corporate news, Southwest Airlines showed some resilience in the face of its Q3 profitability warning due to the Delta variant disruption on travel, WW International tumbled after missing quarterly expectations and issued disappointing guidance, and Coinbase rallied after easily topping the Street’s estimates. Treasuries were higher as yields dipped, the U.S. dollar modestly trimmed a recent bounce, crude oil prices remained choppy before closing higher and gold gained ground. In other economic news, mortgage applications rose last week. Asia finished mixed and Europe closed higher.
The Dow Jones Industrial Average rose 220 points (0.6%) to 35,485 and the S&P 500 Index gained 11 points (0.3%) to 4,448, while the Nasdaq Composite decreased 23 points (0.2%) to 14,765. In moderate volume, 750 million shares were traded on the NYSE and 3.9 billion shares changed hands on the Nasdaq. WTI crude oil moved $0.96 higher to $69.25 per barrel. Elsewhere, the gold spot price advanced $21.60 to $1,753.30 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.2% lower to 92.90.
The Consumer Price Index (CPI) rose 0.5% month-over-month (m/m) in July, matching the Bloomberg consensus estimate and compared to June’s unrevised 0.9% increase. The core rate, which strips out food and energy, was up 0.3% m/m, versus expectations of a 0.4% gain and below June’s unadjusted 0.9% rise. Y/Y, prices were 5.4% higher for the headline rate, slightly above forecasts projecting a 5.3% increase and in line with June’s unrevised rise. The core rate was up 4.3% y/y, matching projections and south of June’s unrevised 4.5% increase.
The Bureau of Labor Statistics (BLS) said prices for shelter, food, energy, and new vehicles all increased, along with prices for recreation, medical care, and personal care. The BLS added that prices for used cars also increased but at a rate that was much smaller than in recent months, while prices for motor vehicle insurance decreased and airline fares fell slightly.
The MBA Mortgage Application Index rose by 2.8% last week, following the prior week’s 1.7% decrease. The increase came as a 3.2% gain for the Refinance Index was met with a 1.8% rise for the Purchase Index. The average 30-year mortgage rate increased 2 basis points (bps) to 2.99%.
Treasuries were higher in the wake of the inflation data, as the yields on the 2-year and 10-year notes declined 2 bps to 0.22% and 1.33%, respectively, and the rate on the 30-year bond decreased 1 bp to 1.99%.
©2021 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.
Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.