Stocks Enjoy a Winning Week Thanks to Easing Inflation
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Last Updated 4:25PM EST
Stock indices finished Friday’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 gained 1.27%, 1.73%, and 2.06%, respectively.
Furthermore, Treasury yields declined today, with the U.S. 10-Year Treasury yield falling to 2.84%, down 4.9 basis points from yesterday. Conversely, the Two-Year Treasury yield increased to 3.255%. This brings the spread between them to -41.5 basis points.
Investors enjoyed a winning week as inflation data came in softer than expected. Although a pleasant surprise, there is still no guarantee that the inflation problem is over. Indeed, inflation still remains high, it was just slightly lower than initially believed at the beginning of the week.
Nevertheless, the futures market is pricing in a higher chance of a lower Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 3.75% to 4% decreased to 17.6%, which is down from yesterday’s expectations of 19.3%. In addition, the market is now also assigning a 32.6% probability to a range of 3.25% to 3.5%. For reference, investors had assigned a 30.5% chance yesterday.
Prices at the Pump Continue to Decline
Last Updated 3:00PM EST
Stock indices are in the green heading into the final hour of today’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1%, 1.4%, and 1.7%, respectively.
WTI crude oil is currently hovering around the high-$91 per barrel range, trading not too far away from its session low of $91.19 per barrel.
Gas prices across the country continue their downward momentum. Indeed, the national average for regular gas remains below $4 per gallon. Today’s average price is $3.978 per gallon, down from yesterday’s reading of $3.99. This is significantly lower than the all-time high of $5.016 per gallon on June 14.
The highest prices can be found in Hawaii, where prices are substantially higher than the national average, at $5.386 per gallon. On the other hand, Texas is the state with the lowest gas prices, at $3.483 per gallon.
It’s likely that this downward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation. However, higher rates will destroy demand throughout the whole economy.
Consumer Inflation Expectations Rise
Last Updated 12:00PM EST
Equities are in the green halfway into Friday’s trading session. As of 12:00 p.m. EST, The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.7%, 0.9%, and 1.2%, respectively.
The energy sector is the session laggard so far, as it is down 0.6%. Conversely, the technology sector (XLK) is the session’s leader, with a gain of 1.3%.
Furthermore, WTI crude oil remains in the red, as prices are currently hovering around the mid-$92 range. Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 2.85%. This represents a decrease of more than three basis points from the previous close.
On Friday, the University of Michigan released its preliminary results on consumer inflation expectations over the next five years. Consumers now expect inflation to be 3%. This number has pulled back from its June high of 3.3%. However, it’s ticked up slightly from July’s reading of 2.9%. It’ll be interesting to see how these results will change going forward given the softer-than-expected CPI report from Wednesday.
Stocks are in the Green to Start Friday’s Trading Session
Last Updated 10:00AM EST
Stock indices are in the green 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.2%, 0.4%, and 0.7%, respectively.
The energy sector (XLE) is the laggard so far, as it is down 0.7%. Conversely, the communications sector (XLC) is the session’s leader, with a gain of 0.8%.
WTI crude oil remains below $100 per barrel, with the price hovering around $92 per barrel. Yesterday’s session saw the commodity rally to a high of $95.04 per barrel after the International Energy Agency hiked its demand outlook for oil. Nevertheless, today’s price equates to a fall of more than 2% from yesterday’s close.
Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 2.85%. This represents a decrease of more than three basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 3.23%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -38 basis points.
Pre-Market Update
Stock futures climbed in the pre-market trading hours Friday as investors cheered another positive inflation report.
Futures on the Dow Jones Industrial Average (DJIA) gained 0.53%, while those on the S&P 500 (SPX) inched 0.61% higher, as of 4.31 a.m. EST, Friday. Meanwhile, the Nasdaq 100 (NDX) futures climbed 0.70%.
The producer price index (PPI) for July was revealed to have cooled to 9.8% from June’s reading of 11.3%, handily surpassing the consensus expectation of a 10.4% year-over-year price rise. Notably, the PPI shows a supply-side view of the inflation situation.
Earlier this week, the consumer price index brought relief to the market after logging an 8.5% year-over-year price rise which was better than what economists had expected.
These two key inflation data together indicate that the hottest inflation in four decades has likely to have peaked and is on a road to sustained cooling.
Simultaneously, Thursday also brought to us some concerning news. The National Association of Realtors said Thursday that home prices in the U.S. saw steady growth in the second quarter, despite a waning buyer demand induced by higher mortgage rates. This was because the supply of housing units was still below the demand for housing.
Moreover, the weekly jobless claims for the week ending August 5 continued its climb since March to reach the highest number this year thus far. The Labor Department reported 262,000 unemployed workers last week, up from 248,000 reported for the week ending July 29.
The mixed economic updates from Thursday indicate that it may be too early to celebrate. Mixed sentiment among investors were reflected in lukewarm performances in the stock market. The S&P500 and the Nasdaq 100 slipped 0.07% and 0.65%, respectively, at market close Thursday. Meanwhile, the Dow inched up slightly, closing 0.08% higher.
Investors are now awaiting data on import prices and consumer sentiment report that are slated for release on Friday. These data will give us more information about the economy’s financial situation.
