The Dow Jones Industrial Average traded lower in early afternoon Wednesday, but was off the day’s worst levels and the Nasdaq Composite index inched up in the wake of data showing US inflation climbed to a new 41-year high of 9.1% in June, as gasoline prices surged.
How are stock indexes trading
The Dow Jones Industrial Average DJIA
lost 96 points, or 0.31% to 30,884
The S&P 500 SPX
jumped 3.07 points, or 0.08% to 3,821
The Nasdaq Composite Comp
gained 26.65 points, or 0.25% to 11,292
On Tuesday, the Dow industrials DJIA
fell 193 points, or 0.62%, to 30,981, the S&P 500 SPX
decreased 0.9% to 3,819, and the Nasdaq Composite Comp
dropped 0.9%, to 11,265.
The S&P 500 has lost 83.82 points, or 2.1%, over the last three trading days.
What’s driving markets
Inflation, in the shape of the June consumer price index report, remains the focus for traders on Wednesday.
Soaring gasoline prices in June drove the rate of US inflation to 9.1%, a nearly 41-year peak. The CPI jumped 1.3% last month to mark the third time in the last four months it’s topped 1%. Economists polled by The Wall Street Journal had forecast a 1.1% advance.
“We continue to see new record highs for inflation and it will weigh heavily on the markets,” Greg Bassuk, chief executive at AXS Investments, said in an interview. “We saw last month with CPI overshooting expectations, June ended up being really troubling for risk assets. And so we believe investors are increasingly concerned of even more aggressive Fed rate hikes and therefore the likelihood of exacerbating recessionary fears. ”
After the CPI data was released, traders’ expectations for a 100 basis point rate hike by the Federal Reserve at its next meeting jumped to 42%, up from 7.6% on Tuesday, according to the CME FedWatch Tool.
President Joe Biden on Wednesday said in a statement that while a “headline inflation reading is unacceptably high, it is also out-of-date.” “Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices, that have reduced the price at the pump by about 40 cents since mid-June,” Biden said.
The International Monetary Fund on Tuesday warned that a surge in inflation poses “systemic risks” to the US economy, a concern not lost on the Federal Reserve as it seeks to damp rising prices by sharply raising borrowing costs. The Fed’s tighter policy trajectory has removed liquidity from the market and helped pressure equity valuations.
However, Andrew Slimmon, an equity portfolio manager at Morgan Stanley Investment Management, believed that the stocks need signs of inflation peaking, and there’s a good chance that it has already peaked.
“There’re just too many inputs that are coming down,” Slimmon said in an interview on Wednesday. “And this is one of the reasons why I think, for the equity market for the year, we’re in the range. I’m not saying the market’s going to take off from here, but I think we’re in the range of the low for the year. I think the second half of the year is going to be far better than the first half. ”
Meanwhile, the US corporate earnings season kicks into gear on Thursday, and investors will be watching the company’s results for the second quarter, and most importantly, outlook for the rest of the year.
“Based on these continued high prices in energy, the supply chain bottlenecks and corporate earnings are something that investors are going to be hyper focused on,” Bassuk said.
Stocks also need to see earnings are not as bad as consensus strategists’ bearish predictions, according to Slimmon.
“This is purely the fact the consensus estimate for the year has gone up, not down,” said Slimmon. “Companies have actually done better than what is expected and that number has not come down. I’m not saying it’s going to continue to go higher, but what it points to is that companies are doing better than what Wall Street expects. ”
See: Wall Street profit expectations for megabanks have cooled ahead of earnings amid a deep freeze in stocks
Investors should continue to consider inflation sensitive investments that can help protect against the impact of inflation, noted Bassuk. At the same time, “we think that high volatility is going to continue to characterize July markets,” Bassuk said. Thus investors should also consider alternative investments that are designed to cushion portfolios, according to Bassuk.
Earlier, Japan’s NIKKEI 225 Index JP: NIK
jumped 142.11 points or 0.54% to 26478.77 and China’s Shanghai Composite CN: SHCOMP
was up 2.83 points or 0.09% to 3284.29. But European stocks sunk, with the STOXX Europe 600 Index FXXP00
losing 4.23 points or 1.01% to 412.81, and London’s FTSE 100 Index UK: UKX
was down 53.49 points or 0.74% to 7156.37.
Companies in focus
Shares of Delta Air Lines Inc.
dropped 5.73% Wednesday, after the air carrier reported second-quarter profit that fell well short of expectations but revenue that rose above pre-pandemic levels to beat forecasts. Net income of $ 735 million, or $ 1.15 a share, was down from 1.44 billion, or $ 2.21 a share, in the same period in 2019.
Shares of IronSource Ltd.
jumped 50.67% Wednesday after the business app company agreed to be acquired by Unity Software Inc. in an all-stock deal valued at $ 4.4 billion. Unity stock is down about 3.8%.
Polestar Automotive Holding UK PLC
shares went up 6.31% after the Swedish electric car company backed its full-year guidance for deliveries of 50,000 cars, as the company offered an update on its year-to-date performance.
Bourses across Europe mostly followed Wall Street’s overnight retreat, leaving the Stoxx 600 XX: SXXP
The US 10-year Treasury yield BX: TMUBMUSD10Y
went down 4 basis points to 2.936%.
The ICE Dollar Index DXY
was down 0.4%.
WTI crude CL
added 1.4% to $ 97.20 a barrel having lost 8.5% over the previous two sessions on fears slowing economic growth would hit demand.
went up 0.7% at $ 1,737 an ounce and Bitcoin BTCUSD
was lower at around, 19,460.
-Jamie Chisholm contributed reporting to this article