4:12pm: Dow sniffed 18-month high early in the session
The Dow closed Thursday up 53 points, 0.2%, at 35,176, the Nasdaq Composite added 16 points, 0.1%, to 13,738 and the S&P 500 improved 1 point to 4,469. The small-cap Russell 2000 index dipped 9 points, 0.5%, to 1,922.
The DJIA approached an 18-month high Thursday morning, even trading at nearly 35,600.
Investors responded well to softer-than-expected inflation numbers. The Bureau of Labor Statistics reported that the consumer price index (CPI) rose 0.2% from June to July, giving annual growth of 3.2%, up from the annual rate of 3% in June. The figure was below expectations for annual growth of 3.3%.
“Overall, this builds on the market’s expectations around a potential soft landing,” said Michelle Culver, portfolio strategist at Global X. “This was an encouraging inflation print for markets and Fed expectations.”
12:30pm: Dow Jones trending upwards
US stocks remained in positive territory in the early afternoon buoyed by a softer-than-expected US inflation print.
The Nasdaq had added 47 points or 0.3% at 13,767 points, the Dow Jones was up 120 points or 0.3% at 35,243 points, and the S&P 500 had gained 12 points or 0.3% at 4,480 points.
The Dow Jones neared an 18-month high - earlier rallying to almost 35,600 points - on the back of the CPI reading and an uptick in initial unemployment trends noted FOREX.com market researcher Matt Weller.
“As long as this week’s low near 35,000 holds, the short-term path of least resistance will remain to the topside, with a break above 35,700 signalling another leg up toward 36,000 or even the record highs near 37,000,” he said.
Weller continued: “Investors have been rotating slightly away from the fast-growing-but-highly-valued technology and communications stocks that have driven much of this year’s rally in favor of so-called “value” stocks.
“At an index level, this shift has benefited the Dow Jones at the expense of the previously high-flying Nasdaq 100, with the former rising roughly 3% from July 19th, while the former has fallen by more than 3% over the same period.”
9:41am: Nasdaq leads the charge after soft inflation print
US markets opended sharply higher after figures showed inflation rose by less than expected in July, boosting hopes that interest rates may have peaked.
Shortly after the opening bell, the Dow Jones Industrial Average was up 313.60 points, 0.9%, at 35,436.96, the S&P 500 was up 41.92 points, 0.8%, at 4,509.63 and the Nasdaq Composite was up 142.45 points, 1.0%, at 13.858.84.
The Bureau of Labor Statistics reported that the consumer price index (CPI) rose 0.2% from June to July, giving annual growth of 3.2%, up from the annual rate of 3% in June. The figure was below expectations for annual growth of 3.3%.
Core inflation, which strips out the volatile food and energy components, rose 0.2% in July, the same rate as the previous month, taking the annual rate of growth to 4.7%, down from 4.8% in June, and in line with forecasts.
Paul Ashworth at Capital Economics, said: "The disinflationary pressures continued to build in July, with both headline and core CPI increasing by a moderate 0.2% m/m."
"Admittedly, the annual headline inflation rate actually ticked up to 3.2%, from 3.0%, while the core rate only edged down to a still high 4.7%, from 4.8%."
"But those rates mostly reflect the still high rates of lagging shelter price inflation. Stripping out shelter as well, core prices fell by 0.1% m/m last month and the annual inflation rate was only 2.5%."
"Overall, there’s nothing here to suggest the Fed needs to push ahead with further interest rate hikes this year," he added.
8:40am: Futures hold gains on soft inflation figures
US headline inflation in July ticked up slightly from June, but by less than expected, boosting the case for the Federal Reserve to hold interest rates steady at its next meeting in September.
The Bureau of Labor Statistics reported that the consumer price index (CPI) rose 0.2% from June to July, giving annual growth of 3.2%, up from the annual rate of 3% in June. The figure was below expectations for annual growth of 3.3%.
Core inflation, which strips out the volatile food and energy components, rose 0.2% in July, the same rate as the previous month, taking the annual rate of growth to 4.7%, down from 4.8% in June, and in line with forecasts.
Futures retained higher after the report indicating a positive when trading kicks off in the next hour.
Alex Livingstone at Titan Asset Management said the number were "below expectations" but he sees some challenges ahead.
"Looking ahead the persistent headline disinflation narrative may face some challenges from rising oil prices but will largely look to be kept on track by the wider deteriorating economic landscape."
7:00am: Stocks called higher ahead of inflation figures
US futures are pointing to a strong start in New York although much will depend on consumer price inflation figures due at 08:30 EST.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.5% higher, while those for the S&P 500 rose 0.5%, and contracts for the Nasdaq 100 futures climbed 0.6%.
Thursday’s US CPI report is expected to show that inflation increased at a 3.3% annual pace in July, up from 3.0% in June, marking the first acceleration since June 2022, while the core measure, which strips out volatile food and energy prices, is expected to ease slightly to 4.7% from 4.8%.
Joshua Mahony at Scope Markets thinks “some form of rise is largely a foregone conclusion, with base effects meaning that the July 2022 monthly reading of 0% is replaced with today's July 2023.”
“With only one other reading at zero or below in the past year it is highly likely that inflation turns higher in the US,” he explained.
“The big question mark is how markets will react to what is essentially a known entity, with a new upward trajectory signalling that there is still some way to go for the Federal Reserve despite having made such progress on driving CPI down towards their 2% target.”
Ipek Ozkardeskaya at Swissquote Bank reckons while any bad surprise on the inflation front could revive the Federal Reserve hawks, “we are far from pricing another hike in September just yet.”
Markets currently see a 87% chance of the Fed holding interest rates steady at its September meeting, according to the CME FedWatch tool.
In company news,Alibaba Group (NYSE:BABA) reported a rise in quarterly revenue to RMB234.16 billion from RMB205.56 billion a year ago, better than the RMB 223.75 billion forecast.
Net income of RMB34.3 billion also topped estimates and shares rose 3.7% % in pre-market trading.
The Walt Disney Company (NYSE:DIS) will be in focus, with shares up 1.4% ahead of the open, as plans to increase streaming prices and possibly clampdown on password sharing took the heat of news of a fall in subscriber numbers.
After Wednesday’s market close, Disney delivered somewhat tepid results with revenue of $22.33 billion slightly behind Street expectations of $22.5 billion, along with earnings of $1.03 per share, compared to projections of $0.95.