Tame US June CPI smooths path for Fed ease
July 11, 2024Rate cut prospects could bolster US stocks as investors await earnings, elections
July 11, 2024The New York Stock Exchange set new records on Wednesday before the publication of an inflation index on Thursday and after assurances from the head of the Federal Reserve, Jerome Powell, that price developments are going in the right direction.
The Dow Jones index gained 1.09% to 39,721.36 points, and the technology-dominated Nasdaq climbed 1.18% to 18,647.45 points, setting a seventh record in a row.
The S&P, also at a new peak, advanced 1.02% to 5,633.91 points, passing the 5,600 point mark for the first time.
Jerome Powell, Chairman of the Federal Reserve (Fed), repeated before Congress his message of expectation on future monetary policy, after the first part the day before his biannual hearing before elected officials on the state of economy.
As on Tuesday, he signaled the progress of inflation towards the 2% target and indicated that the Fed was no longer focusing only on the risks of rising prices but also on that of a deterioration in the job market.
The Fed boss also insisted that there was no question of waiting for inflation to return to 2% before acting on rates. “It would be too late,” he insisted.
“Jerome Powell kept the same tone. He opened the door wider to a rate cut” in September, “and that is what is driving the stock market movement,” judged Peter Cardillo of Spartan Capital.
“He has clearly telegraphed to the market that there will be a rate cut in September,” assured the analyst.
Art Hogan of B. Riley Wealth Management estimates that “the September 18 monetary meeting now shows a rate cut probability of 75.2% compared to 65% last week.”
On the bond market, yields on ten-year Treasury bills fell slightly to 4.28% instead of 4.29%, while an issue of ten-year bonds was well received.
The important indicator of the week is for Thursday with the publication of the CPI consumer price index for June.
Over one year, analysts forecast it at 3.1% instead of 3.3% in May. Over one month, however, it should rise to +0.1% compared to +0.0% in May.
“It’s a good day today because generally, the market is more hesitant on the eve of an important indicator like inflation, but on the contrary, it frequents the peaks,” commented Peter Cardillo.
For the Spartan Capital analyst, “if inflation does not hold any unpleasant surprises, the indices could close the week on a very positive note.”
On the market, mega-caps continue to support the market, particularly Apple, whose stock reached a peak at $232.98, up 1.88%. The Apple firm has returned to the top of the largest capitalizations on Wall Street, just ahead of Microsoft.
Nvidia, the designer of chips for generative artificial intelligence, continued its run, progressing almost like the day before (+2.69%).
Its competitors also benefited from the momentum such as AMD (+3.87%), Arm (+2.29%), Micron Technology (+4.00%). Its supplier Taiwan Semiconductor Manufacturing climbed 3.52%.
On the distribution side, Target stores lost 1.00% while the chain announced that it would no longer accept consumer checks. The DIY stores Lowe’s (+2.03%) and Home Depot (also +2.03%) were sought after.
On the financial side, Mastercard stumbled (-2.49%), after a poor rating from Bank of America analysts. Visa followed the slope (-0.92%).
