Matteo Colombo
Wall Street’s major stock averages bounced higher Tuesday after cooling wholesale prices marched in ahead of July consumer-price inflation data that could set the stage for the Federal Reserve’s next policy move.
The S&P 500 (SP500) +1.5%, the Nasdaq Composite (COMP:IND) +2.2%, and the Dow (DJI) +0.9%. The Information Technology group (XLK) rose nearly 3%, pacing the ten gaining sectors on the S&P 500 (SP500). The Energy sector (XLE) remained in the red, but off session lows.
Equities advanced as the Labor Department said producer prices in July edged up 0.1%. The reading was less than the +0.2% expected and cooled from June’s 0.2% increase. PPI’s Y/Y increase cooled to 2.2% Y/Y and core PPI was flat on a monthly basis.
“The runway is clear for the Fed to cut rates in September. If data like this persists, the Fed will have plenty of room to cut rates further this year,” Jamie Cox, managing partner at Harris Financial Group, said in a note.
Wednesday will deliver the July Consumer Price Index inflation report, with economists widely expecting the CPI to rise by 0.2% m/m. July retail sales data are due Thursday as investors work to gain more clarity on the economic landscape, after recession fears recently spurred an equity selloff.
In the fixed-income market, the 10-year Treasury yield (US10Y) fell 5 basis points to 3.86% as prices rose. The 2-year yield (US2Y) was down 7 basis points to 3.96% as prices rose.
Major market averages ended Monday’s session mixed as traders waited on inflation data.
Among individual stocks, Starbucks (SBUX) +22% after replacing CEO Laxman Narasimhan with Chipotle Mexican Grill’s (CMG) CEO Brian Niccol, effective Sept. 9. Chipotle (CMG) stock -7.6%.
Baxter (BAX) -7% following a deal to divest its kidney care segment to Carlyle for $3.8B.
