Most of Wall Street rises after a pivotal inflation report comes up cool
Business
Most of Wall Street rises after a pivotal inflation report comes up cool
NEW YORK (AP) — Most U.S. stocks are rising Thursday after the latest update on inflation bolstered Wall Street’s belief that relief on interest rates may come as soon as September.
Four out of every five stocks in the S&P 500 index were climbing, though pullbacks for Microsoft and several other big, influential companies that have soared recently masked that underlying strength. The benchmark index was down 0.3% in morning trading from its all-time high set a day before.
The dips for Big Tech stocks also dragged the Nasdaq composite down 0.8% from its own record, while the Dow Jones Industrial Average was 15 points higher, or less than 0.1%, as of 10:35 a.m. Eastern time.
But the direction was decidedly up for the majority of stocks on Wall Street, particularly homebuilders, real-estate owners and other stocks that tend to benefit the most from easier interest rates. BXP, the company that owns Boston’s Prudential Center and other high-profile office developments across the country, climbed 5.1% for one of the market’s biggest gains.
Smaller companies that have been lagging behind the market’s behemoths for a while were also strong, and the Russell 2000 index of smaller stocks leaped 3.1% to lead the market decisively.
Wall Street wants lower interest rates because that can release pressure built up on the economy due to how expensive it’s become to borrow money to buy houses, cars or anything on credit cards. Fed officials, though, have been saying they want to see “more good data” on inflation before making a move. They’ve kept rates high to intentionally put downward pressure on the economy, hoping to fully snuff out the worst inflation in generations.
Wall Street sees Thursday’s report, which showed milder increases than expected for prices of gasoline, cars and other things U.S. consumers bought during June, as providing just that.
“One word: pivotal,” said Lindsay Rosner, head of multi-sector investing within Goldman Sachs Asset Management. “With three inflation prints between this morning and September’s Fed meeting, today’s print was crucial in helping the Fed gain confidence inflation is still moving in the right direction.”
Following the report’s release, Treasury yields tumbled immediately. The yield on the 10-year Treasury dropped to 4.18% from 4.28% late Wednesday and from 4.70% in April. That’s a major move for the bond market and provides a big lift for stock prices.
The two-year Treasury yield, which more closely tracks expectations for Fed action, eased to 4.50% from 4.62% late Wednesday.
The lower yields helped the majority of the U.S. stock market to rise. Real-estate owners and utilities led the way because falling bond yields make their relatively high dividends look more attractive to investors seeking income.
Real-estate investment trusts in the S&P 500 jumped 2.3% for the biggest gain by far among the 11 sectors that make up the index. Utility stocks were the second-best in the index with a gain of 1.5%.
Homebuilders were also strong on hopes that lower mortgage rates will juice the industry. PulteGroup rose 5.9% and D.R. Horton climbed 5.6% for some of the biggest gains in the S&P 500.
Besides hopes for coming cuts to interest rates, expectations for strong profit growth amid a resilient but slowing economy have also helped to push the U.S. stock market to records. Analysts expect S&P 500 companies to deliver their best growth in more than two years this upcoming reporting season, but it’s getting off to a mixed start.
Delta Air Lines lost 6.2% after reporting slightly weaker revenue and profit for the spring than analysts expected. The airline said demand is strong for peak summer travel, but it also gave a profit forecast for the current quarter that fell short of Wall Street’s estimates.
PepsiCo fell 0.6% despite topping profit forecasts for the spring. Its revenue for the latest quarter came in a bit shy of analysts’ expectations, and the food giant said that an important underlying measure of revenue will likely come in at the bottom of its earlier forecasted range for the full year.
On the winning end was WD-40, which rose 2.8% after reporting stronger profit and revenue than analysts expected.
In stock markets abroad, Japan’s Nikkei 225 rose 0.9% to set another all-time high.
Indexes were also strong across much of the rest of Asia and Europe.
