Stocks shook off earlier losses on Thursday to rise to record closing highs, as investors took into account more mixed economic data and considered the likelihood of more government spending on infrastructure.
The S&P 500 gained 0.3% to post a record closing high, with the healthcare and information technology sectors leading the way higher. The Dow also logged a record close, and the Nasdaq Composite gained for the first time in three sessions. The moves came after a new report on weekly jobless claims met estimates, while a separate print on producer price increases came in hotter than expected.
Heading into the session, one of the latest sources of fuel for equities came after the Labor Department’s monthly consumer price index showed that prices rose in-line with expectations in July, gaining 0.5% month-on-month to decelerate from June’s gain. Prices for used cars and trucks and airline tickets slowed markedly, underscoring the moderation in inflationary pressures as the economic recovery matured and an initial wave of pent-up consumer demand was released.
“We’re still at very high levels of inflation in this country and the debate still rages as to whether we’re going to see a glide path towards substantially lower levels of inflation, or will it remain at sticky levels much higher than what was anticipated by the Fed and market participants,” Mark Luschini, chief investment strategist at Janney Montgomery Scott, told Yahoo Finance. “However in the meantime, it also does suggest that perhaps we have seen the peak in this inflation cycle … perhaps it’s indicative that what the Fed has suggested to investors, that this inflationary spike will be transitory, will turn out to come to fruition.”
Meanwhile, the passage in the U.S. Senate of a $1 trillion infrastructure bill earlier has further boosted cyclical stocks like industrials and materials, given these companies stand to gain directly from the increased government spending on physical structures. The chamber also voted to approve the framework for a $3.5 trillion budget resolution that would address a more expansive set of healthcare, childcare, education and climate change initiatives central to the Biden administration’s goals.
With U.S. equity markets at record highs, many investors have been awaiting the next catalysts for risk assets, especially given the recent strength in economic data and second-quarter earnings results among major corporations. Many pundits have suggested a slowdown in both economic and earnings growth across a number of major data points is likely going forward, given that the peaks appear to have been put in for these areas.
“I would probably summarize [the backdrop now] in one word, which is ‘deceleration,'” Omar Aguilar, chief investment officer of passive equity and multi-asset strategies at Charles Schwab Investment Management, told Yahoo Finance. “If you think of all the data that we have received over the last few weeks, it all points to deceleration of all sorts. The economy is decelerating, earnings growth is decelerating. The rate of inflation that we just saw this morning is also decelerating. The peak in most of these indicators suggests that going forward, we’re going to continue to see deceleration of the majority of these things.”
“That’s obviously a mixed signal for the market,” he added. “The market seems to have taken it the right way, mostly thinking that this confirms the Fed officials’ view that inflation will be transitory, and therefore, the possibility for those rates to stay lower and for the tapering program to start later this year or early next year … [but] we should expect more volatility, because more mixed signals will continue to happen.”
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4:05 p.m. ET: S&P 500, Dow eke out record closing highs, shaking off earlier losses amid mixed economic data, earnings
Here were the main moves in markets as of 4:05 p.m. ET:
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S&P 500 (^GSPC): +13.13 (+0.30%) to 4,460.83
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Dow (^DJI): +14.88 (+0.04%) to 35,499.85
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Nasdaq (^IXIC): +51.13 (+0.35%) to 14,816.26
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Crude (CL=F): -$0.33 (-0.48%) to $68.92 a barrel
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Gold (GC=F): +$1.80 (+0.10%) to $1,755.10 per ounce
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10-year Treasury (^TNX): +2.8 bps to yield 1.3670%
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11:07 a.m. ET: How investors should be thinking about inflation: Strategist
Inflation data for consumers and producers have been at odds with one another for July, with the Labor Department’s consumer price index showing a moderation in inflationary pressures in July, whereas the producer price index showed an acceleration.
For both indexes, however, the absolute level of inflation is still running at elevated levels well above pre-pandemic trends.
“The market’s going to grasp on to one of two conclusions,” Edward Jones’ principal Craig Fehr told Yahoo Finance. “Either you look at the nominal number and inflation is running really high or you could look at the rate of change which suggests there’s some moderation… I live somewhere between, which is I think we will see inflation moderate, but not back to levels we got used to during the prior expansion from 2009 to 2020. I think we’ll settle at a slightly higher level, which is going to bring in that taper conversation sooner rather than later.”
“The good news here for investors is, we don’t have to fear the taper. Meaning that that phase between the announcement … and the actual commencement of reduction of bond purchases might add a little bit of volatility and anxiety, but it’s not going to change in investment complexion,” he added. “It won’t change the backdrop for how markets are likely to behave more broadly, mostly because the Fed tapering means that economic conditions are sufficiently strong that we don’t need this level of extraordinary stimulus.”
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9:33 a.m. ET: Stocks open slightly lower, erasing overnight gains
Here’s where markets were trading Thursday morning just after the opening bell:
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S&P 500 (^GSPC): -5.73 (-0.13%) to 4,441.97
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Dow (^DJI): -21.09 (-0.06%) to 35,463.88
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Nasdaq (^IXIC): -29.94 (-0.17%) to 14,739.43
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Crude (CL=F): -$0.19 (-0.27%) to $69.06 a barrel
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Gold (GC=F): -$3.70 (-0.21%) to $1,749.60 per ounce
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10-year Treasury (^TNX): +0.7 bps to yield 1.366%
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8:38 a.m. ET: Producer prices rose more than expected in July, accelerating over last year
Producer price increases exceeded estimates in July, with ongoing supply chain constraints and scarcities as well as commodity costs pushing up the prices paid to producers.
Producer prices rose 1.0% month-on-month in July, the Labor Department reported Thursday. This matched June’s monthly rise, and came in ahead of the 0.6% rise expected.
Excluding food and energy, the producer price index was still up by 1.0% to match the June rate.
Over last year, the broadest measure of producer price increases rose 7.8%, coming in at an all-time high and accelerating from June’s 7.3% annual rise and topping consensus estimates for 7.2%. Excluding food and energy, the index was up 6.2%, also speeding compared to the 5.6% increase expected.
About three-fourths of the overall July increase in prices came from a jump in final demand services prices, the Labor Department said. The index tracking final demand services was up 1.1% in July for the biggest increase ever recorded in data going back to December 2009. This in turn was led by a jump in final demand trade services, related to wholesaler and retailer margins.
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8:34 a.m. ET: New weekly jobless claims meet estimates, dipping for a third straight week
Initial unemployment claims came in at the expected level last week, falling for a third straight week and coming in below the psychologically important 400,000 mark.
New jobless claims were 375,000 during the week ended August 7, the Labor Department said Thursday. During the prior week, claims totaled 387,000, with this level upwardly revised by just a hair from the 385,000 previously reported.
Encouragingly, the total number of claimants across all programs took a major leg lower last week, dropping by more than 900,000 to a total of about 12 million. During the prior week, total claimants had fallen by approximately 200,000.
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7:40 a.m. ET: Palantir shares gain after Q2 earnings top estimates, company raises forecast
Shares of Palantir (PLTR) jumped by more than 7% in early trading Thursday morning after the technology company posted better-than-expected second-quarter results and raised its revenue forecast for the current period.
For the second quarter, revenue of $375.6 million grew 49% over last year to come in better than the $360.3 million expected, according to Bloomberg consensus data. On net, Palantir brought on 20 new customers for the second quarter to increase total customers by 13% compared to the first quarter. Palantir, which derives significant revenue from government contracts, also logged new deals in the second quarter with the U.S. Army, Air Force, Federal Aviation Administration and Department of Health and Human Services, in addition to other government agencies.
The company also eked out a profit on an adjusted basis, with adjusted earning per share of 4 cents coming in a penny better than estimated.
For the third quarter, Palantir anticipates sales will total $385 million, topping estimates by $5 million. The company also maintained its longer-term guidance to see annual revenue growth of at least 30% for 2021 through 2025.
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7:11 a.m. ET Thursday: Stock futures point to a higher open
Here’s where markets were trading Thursday morning:
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S&P 500 futures (ES=F): +3 points (+0.07%) at 4,443.50
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Dow futures (YM=F): +46 points (+0.13%) to 35,418.00
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Nasdaq futures (NQ=F): +6.25 points (+0.04%) to 15,025.75
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Crude (CL=F): -$0.21 (-0.3%) to $69.04 a barrel
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Gold (GC=F): -$1.10 (-0.06%) to $1,752.20 per ounce
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10-year Treasury (^TNX): unchanged, yielding 1.359%
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6:13 p.m. ET Wednesday: Stock futures open mixed
Here’s where markets were trading Wednesday evening:
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S&P 500 futures (ES=F): -0.25 points (-0.01%) at 4,440.25
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Dow futures (YM=F): +9 points (+0.03%) to 35,381.00
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Nasdaq futures (NQ=F): -15.5 points (-0.1%) to 15,004.00
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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