Wall Street got an extra dose of encouragement to bid up stocks after another inflation report reinforced bets the Federal Reserve is approaching an interest-rate peak.
(Bloomberg) — Wall Street got an extra dose of encouragement to bid up stocks after another inflation report reinforced bets the Federal Reserve is approaching an interest-rate peak.
All of a sudden, “disinflation” becomes the buzzword across trading desks, with investors looking on the bright side of data showing a slowdown in prices — even though core inflation is still running well above the central bank’s target. As equities push toward their fourth straight day of gains, tech megacaps are back to the forefront amid a drop in bond yields.
Read: Stocks Took an 18-Month Round Trip From Tech Bear to AI Bull
The advance in the Nasdaq 100 topped 1%, with the measure trading at its highest level since January 2022. Amazon.com Inc. hit a 10-month high after reporting record sales during its Prime Day sale and Google’s parent Alphabet Inc. rose almost 5%. Two-year yields, which are more sensitive to imminent policy moves, fell 11 basis points to 4.64%. The dollar declined for a fifth consecutive session.
US producer prices increased 0.1% in June from a year earlier, rising at the slowest pace in nearly three years and extending a months-long deceleration in pipeline inflationary pressures.
“The disinflation narrative is in full effect,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “It does appear that inflation is coming down across the board, and although the Fed is still likely to raise rates again at the end of this month, there is a very strong possibility that they are done raising rates for the year.”
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The recent economic figures have sent clear signals that the Fed’s policy is working, but it’s possibly too early to claim victory against inflation, according to Fiona Cincotta, senior market analyst at City Index.
“And with that in mind, if I had to choose a camp, I would probably go in the two rate hikes to come – July and possibly another one later in the year,” Cincotta added.
JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. are set to report results Friday, followed by other industry heavyweights next week. Expenses will be under scrutiny as the industry thins out its ranks to cope with a slowdown in deals and pays more to hold on to deposits as rates rise. Those challenges are likely to weigh on net interest income, a major source of revenue.
In other corporate news, Delta Air Lines Inc. said it will make more money this quarter than Wall Street anticipated as it reported better-than-predicted results for the prior three months. PepsiCo Inc. raised its sales and earnings estimates once again after a strong quarter. Exxon Mobil Corp. agreed to buy Denbury Inc. for $4.9 billion, its biggest acquisition in six years.
Key events this week:
- US University of Michigan consumer sentiment, Friday
- US banks kick off earnings, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.6% as of 12:02 p.m. New York time
- The Nasdaq 100 rose 1.2%
- The Dow Jones Industrial Average rose 0.1%
- The Stoxx Europe 600 rose 0.6%
- The MSCI World index rose 1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.6% to $1.1194
- The British pound rose 0.8% to $1.3098
- The Japanese yen rose 0.3% to 138.14 per dollar
Cryptocurrencies
- Bitcoin rose 1.8% to $30,896.48
- Ether rose 3.5% to $1,937.72
Bonds
- The yield on 10-year Treasuries declined seven basis points to 3.79%
- Germany’s 10-year yield declined nine basis points to 2.49%
- Britain’s 10-year yield declined nine basis points to 4.42%
Commodities
- West Texas Intermediate crude rose 0.3% to $75.99 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller, Tassia Sipahutar, Robert Brand, Lynn Thomasson and Isabelle Lee.
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