US Stock Indices Experience Positive Gains
The Dow Jones Industrial Average rose on Wednesday following the release of more encouraging inflation data in the United States, as reported by CNBC.
The index, which comprises 30 companies, increased by 242 points, closing the day at 40,008.39 points. The broader S&P 500 index advanced by 0.38% to reach 5,455.21 points, marking its fifth consecutive day of gains. Meanwhile, the Nasdaq Composite recovered from earlier losses, finishing the session with a modest increase of 0.03%, closing at 17,192.60 points.
Inflation Data Shows Positive Trends
Consumer prices in the US rose by 2.9% year-over-year, a slowdown from 3% in June and the lowest inflation rate since March 2021, according to data from the Bureau of Labor Statistics released on Wednesday. On a monthly basis, prices increased by 0.2%. Economists surveyed by Dow Jones had anticipated a 0.2% rise from the previous month and a 3% increase year-over-year.
The so-called core inflation, which excludes food and energy, also rose by 0.2% month-over-month, aligning with expectations.
This data was released a day after softer-than-expected wholesale inflation, which supported stock prices.
Investor Sentiment and Expectations
Investors were keenly awaiting the inflation data to gain a clearer insight into the state of the economy, further intensifying expectations for a potential interest rate cut during the upcoming central bank meeting in September.
Market expectations are evenly split between a quarter-point and a half-point interest rate cut at the central bank meeting scheduled for September 17 and 18, according to the CME FedWatch tool. Traders anticipate that rates will be reduced by one basis point by the end of the year.
Corporate Movements Impacting Stock Prices
On the corporate front, Kellanova shares surged by 7.8% following the announcement that the company will acquire chocolate manufacturer Mars in a $36 billion deal. Conversely, shares of Alphabet, the parent company of Google, fell by 2.3% after reports emerged that the US Department of Justice is considering breaking up the tech giant.
All three major US indices are now above their levels at the close of the session on August 2, the last trading day before the global market sell-off on August 5, which appeared to be linked to a rise in carry trade activities in the yen.
Concerns Regarding Economic Growth
Despite the increasing risks to growth, we believe that the market is overreacting to a limited number of soft data points, rather than reflecting a drastic change in macroeconomic prospects, commented Gargi Shoduri, Chief Investment and Portfolio Strategist at BlackRock.
Bond Market Developments
In the bond markets, the yields on 10-year and 30-year U.S. Treasury bonds fell to 3.839% and 4.129%, respectively.
Currency Market Update
In the currency markets, the dollar index, which tracks the performance of the U.S. dollar against a basket of six major currencies, rose by 0.03% to 102.59 points. The euro is trading at $1.101, while the pound is at $1.283. Against the yen, the dollar slightly depreciated to 147.22 yen per dollar.
Stock Market Trends
In the stock markets, oil prices decreased amid heightened tensions in the Middle East. Futures for U.S. West Texas Intermediate (WTI) crude oil for September delivery fell by $1.37 to $76.98 per barrel. Contracts for the international benchmark Brent crude for October delivery dropped by 93 cents to $79.76 per barrel.
Gold Futures Decline
Meanwhile, U.S. gold futures decreased by 1.2% to $2,478.80 per troy ounce.
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