Early Gains Evaporate, Stocks Finish Lower…..
U.S. equities gave up an early advance and finished lower after initially getting a boost from a cooler-than-expected read on August consumer price inflation. The data came as markets continued to grapple with the timing of when the Fed may begin to rein in its monthly asset purchases amid the backdrop of the Delta variant impact and continued signs of supply-chain challenges. In other economic news, small business optimism unexpectedly improved though labor shortages and supply-chain disruptions remained drags. Treasuries were higher following the data, applying some downside pressure on yields, and the U.S. dollar was flat after a recent rise. Crude oil prices were little changed, while gold gained ground. In equity news, Oracle posted mixed Q1 results, Intuit announced an agreement to acquire Mailchimp for about $12.0 billion in cash and stock, and Dow member Boeing Company issued its market outlook. Stocks in Europe finished mixed, with Information Technology stocks leading to the upside, while Financials lagged, and markets in Asia also diverged as China and Hong Kong stocks slid.
The Dow Jones Industrial Average fell 292 points (0.8%) to 34,578, the S&P 500 Index declined 26 points (0.6%) to 4,443, and the Nasdaq Composite decreased 68 points (0.5%) to 15,038. In moderate volume, 811 million shares were traded on the NYSE and 4.5 billion shares changed hands on the Nasdaq. WTI crude oil nudged $0.01 higher to $70.46 per barrel. Elsewhere, the gold spot price rose $11.40 to $1,805.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly flat at 92.68.
The Consumer Price Index (CPI) rose 0.3% month-over-month (m/m) in August, below the Bloomberg consensus estimate of a 0.4% gain and compared to July’s unrevised 0.5% increase. The core rate, which strips out food and energy, ticked 0.1% higher m/m, versus expectations to match July’s unadjusted 0.3% rise. Y/Y, prices were 5.3% higher for the headline rate, in line with forecasts and south of July’s unrevised 5.4% rise. The core rate was up 4.0% y/y, below projections of a 4.2% gain and July’s unrevised 4.3% increase.
The Department of Labor said prices for gasoline, household furnishings and operations, food, and shelter all rose in August, along with prices for new vehicles, recreation and medical care costs. However, the report noted that the core rate registered its smallest m/m increase since February 2021, as prices for airline fares, used cars and trucks, and motor vehicle insurance all declined over the month.
The National Federation of Independent Business (NFIB) Small Business Optimism Index for August unexpectedly improved to 100.1 from July’s 99.7 level, and compared to estimates of a decline to 99.0. Five of the ten index components improved, four declined, and one was unchanged. The NFIB Uncertainty Index decreased seven points to the lowest level since January 2016. The NFIB said, “As the economy moves into the fourth quarter, small business owners are losing confidence in the strength of future business conditions.” The report added that the biggest problems facing small employers right now is finding enough labor to meet their demand and for many, managing supply chain disruptions.
Treasuries were higher, as the yield on the 2-year note dipped 1 basis point (bp) to 0.20%, while the yields on the 10-year note and the 30-year bond decreased 5 bps to 1.28% and 1.84%, respectively. The U.S. dollar saw pressure following the inflation data and after a recent rise.
©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.