U.S. stock indexes traded sharply higher on Wednesday, after the July consumer price index report showed a slowdown in headline inflation, primarily thanks to falling energy prices.
How are stock indexes trading
- The Dow Jones Industrial Average DJIA, +1.66% gained 510 points, or 1.6% to around 33,284
- The S&P 500 SPX, +1.94% advanced 75 points, or 1.8% to 4,197
- The Nasdaq Composite COMP, +2.50% rallied 300 points, or 2.4% to 12,793
On Tuesday, the Dow Jones Industrial Average fell 0.2% to 32774, the S&P 500 declined 0.4% to 4122 — its fourth-straight losing session — and the Nasdaq Composite dropped 1.2%, to 12493, its third consecutive drop.
What’s driving markets
The consumer price index was unchanged in July, compared with the 1.3% gain in the prior month, according to the Labor Department. Economists polled by The Wall Street Journal had estimated a 0.2% gain in July.
The rate of inflation in the 12 months ended in July slowed to 8.5% from a 41-year high of 9.1% in June.
The closely-watched core measure of inflation that omits volatile food and energy prices rose 0.3% in July, a slower pace from a 0.7% gain in the prior month. The 12-month rate remained steady at 5.9%.
See: U.S. consumer price inflation surprises to downside in July
“A number of components that people have been flagging as being potentially problematic and keeping inflation persistent at high levels, started to show some easing,” Stephen Hoedt, managing director at equity and fixed income research at Key Private Bank, said in an interview. Hoedt cited a slowdown in the rise of the owners’ equivalent rent index and medical care index in July.
“I really do think that that opens the possibility to the Fed considering 50 basis point hikes instead of 75,” Hoedt said.
The Federal Reserve will consider the data ahead of its September 20-21 policy meeting where it is expected to raise its benchmark interest rate again.
Investors have been eager to see that inflation has peaked. Equities have been roiled in 2022 but despite bouncing off its mid-June low, the S&P 500 index remains down 12% for the year to date. The drop has been driven by 40-year high inflation causing the Federal Reserve to hike borrowing costs aggressively, creating a fear of a recession.
“If this is truly the peak in inflation, this could officially signal an economic tide shift that both consumers and investors can appreciate,” Rusty Vanneman, chief investment strategist at Orion Advisor Solutions wrote in a Wednesday note. “That said, the absolute level of inflation remains painfully high and the risk of being a false peak remains, especially given that two important drivers of inflation are still troublesome: wages and housing.”
After the inflation report was released, the dollar index DXY, -1.62% was down 1.5% to 104.81 and U.S. 10-year Treasury yields TMUBMUSD10Y, 2.749% eased 4.7 basis points to 2.738%.
Damping sentiment though was a recent rash of poorly-received corporate news. There was particular concern about the health of the semiconductor sector after Micron MU, +2.62% followed Nvidia NVDA, +3.88% with a warning about revenues. The PHLX Semiconductor Index SOX, +3.23% is down 26% so far in 2022.
In addition, a recent rally in badly battered former bull market darlings has come to a juddering halt in the past few sessions, also hurting retail investor confidence. And some are due for more pain on Wednesday.
Roblox RBLX, -5.26%, the videogame group, lost 4% after a key sales metric declined for the second consecutive quarter.
Companies in focus
- Sweetgreen Inc. SG, -5.28% shares plunged 7% after the salad restaurant chain’s second-quarter financial results missed Wall Street’s expectations.
- Coinbase COIN, +6.60% shares gained 4.4% as bitcoin price advanced Wednesday, despite that the cryptocurrency exchange said volumes and monthly user counts could be lower in the current quarter than what was seen in the last one.
- Shares of Plug Power Inc. PLUG, +17.94% gained 15.5% Wednesday despite that the hydrogen fuel-cell company fell shy of expectations with its latest revenue and earnings.
- Wendy’s Co. WEN, -2.65% shares lost 3%, after the fast-food company posted weaker-than-expected revenue for the second quarter.
How are other assets faring
- Oil futures were softer, with U.S. WTI CL.1, -1.64% off 2% to $88.73 a barrel.
- Gold GC00, +0.28% gained 0.2% to $1,816.4 an ounce
- Bitcoin BTCUSD, +3.40% advanced 3.6% to $23983
- Asia markets were softer after data showed China’s inflation at a two-year high. The Shanghai Composite SHCOMP, -0.54% lost 0.5%, Hong Kong’s Hang Seng HSI, -1.96% shed 2% and Japan’s Nikkei 225 NIK, -0.65% fell 0.65%.
- In Europe, the Stoxx 600 SXXP, +0.94% gained 0.8%.