Inflation Slows, and Wall Street Moves into the Green
The final results will be excellent. According to several sources, the Dow Jones index gained 1.63% to 33,309.51 points, the Nasdaq jumped 2.89% to 12,854.80 points, its best score since late April and the S&P 500 climbed 2.13% to 4,210.24 points, reaching its highest level in three months.
The S&P 500 index closed in the green, particularly discretionary spending (+2.81%), as investors viewed the slight price slowdown as a relief and a step in the right direction for consumer spending, accounting for two-thirds of the U.S. economy.
The markets’ optimistic stance affected not only stocks but also oil, which also finished higher, buoyed by a return of enthusiasm for risk assets.
As for the dollar, it melted 1% against major currencies as investors believe that with the price run seemingly past a peak, the Federal Reserve (Fed) may be less harsh on rate hikes in the future.
The U.S. CPI price index was unchanged month-over-month in July and stood at 8.5% on a year-over-year basis instead of 9.1% in June. Prices have stalled mainly due to lower fuel costs. “Today is a day when good news for consumers is also seen as good news by the markets,” reacted Art Hogan of B. Riley Wealth.
Calm inflation means that “it is likely that the Fed will not be as aggressive as it has been in the last two monetary meetings,” he added, explaining the market’s “celebration.
Nevertheless, officials of the U.S. central bank, shortly after the release of inflation and the positive reaction of the market, reminded that the Fed remains determined to curb inflation by turning of monetary screws.
Thus Neel Kashkari, from the Minneapolis Fed reminded us that “we are very, very far from declaring victory” against inflation and that the goal remains to bring it back to 2%.
These words of caution have hardly discouraged the enthusiasm of investors, a large majority of them (58%) now betting on a Fed rate hike of half a percentage point in September, instead of three-quarters of an issue (0.75%) estimated the day before, according to futures contracts.
Ten-year bond yields eased sharply just after the inflation figure was released, falling as low as 2.72%, before recovering to 2.79% around 20:00 GMT.
On the stock market, Tesla shares climbed 3.89% to 883.07 USD, as its boss Elon Musk sold nearly 7 billion USD of his claims, a “poker move” of the multi-billionaire that could foreshadow an out-of-court settlement in the aborted takeover of Twitter, suggested Dan Ives, the analyst at Wedbush Securities.
Twitter also rose 3.74% to USD 44.43.
All the big tech names rallied, from Meta (Facebook, +5.82%) to Netflix (+6.16%) to Alphabet (Google), Apple and Microsoft, which all gained more than 2%.
Disney ended up 3.98% at USD 112.43 before jumping almost 6% in after-hours electronic trading with the announcement of better-than-expected quarterly results and especially the addition of 14.4 million subscribers.
Boeing climbed 2.53% to USD 169.02 after American Airlines announced that it had received its first 787.
The U.S. aviation regulator (FAA) said Monday that Boeing had made the “necessary changes” for a resumption of deliveries of its 787 Dreamliner after a total suspension since May 2021 due to operational problems.
The share of the cryptocurrency exchange Coinbase recovered by 7.37% to 94.14 USD the day after the disappointing results for the second quarter that had caused a sharp fall in its price. But the stock was down 1.36% in after-hours trading.