Inventories rose Thursday, with the
closing at a new high as investors ignored higher than expected consumer price inflation as transient.
Dow Jones Industrial Average
gained 0.1%, while heavy technology
increased by 0.8%. The S&P 500 rose 0.5% to close at 4,239.18, a new high.
Consumer prices rose 5% year-on-year, a faster than expected pace. On a monthly basis, consumer prices rose 0.6% in May, while basic prices, excluding food and energy, increased 0.7%. The expectations, according to a Dow Jones Newswires / Wall Street Journal poll, were for both the Consumer Price Index and the core measure that excludes food and energy costs to rise 0.5% in may.
Investors did not seem scared. The 10-year Treasury yield, which often rises with inflation, fell to 1.45%, well below its recent high of 1.75%. This has helped tech stocks outperform, as they rely on longer-term cash flow, the value of which is very sensitive to changes in long-term bond yields. Americas market analyst at OANDA.
The concern is that the Federal Reserve will respond to inflation by reducing the size of its bond buying program, which would lower bond prices and raise yields, which would be negative for stock valuations. Still, numbers like today’s CPI are sure to raise the Fed’s eyebrows, but ultimately they will likely need more evidence to determine whether upward pressures from inflation will be more persistent, writes. Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.
Inflation is still viewed by investors as transitory so far. This means prices are rising from depressed levels seen in last year’s lockdowns as companies grapple with supply chain constraints, but only in the short term. The force was again largely dominated by transient elements, writes Citigroup economist Andrew Hollenhorst, citing plane tickets and used cars as examples.
Meanwhile, weekly jobless claims fell, falling from 9,000 to 376,000 and remaining below 400,000 for the second week in a row.
Most Asian markets have made minor progress, with the
up 0.3%. The Stoxx Europe 600 rose 0.1% after closing at a new high on Wednesday.
The European Central Bank said on Thursday it would keep its bond buying program in place and left interest rates unchanged at minus 0.5%.
(ticker: GME) shares closed 27.2% lower after the disclosure of a Securities and Exchange Commission investigation into trading in its shares, as well as other so-called memes. GameStop reported higher first quarter revenue, lower than expected quarterly loss, and said it would bring two
executives to run the business and sell up to 5 million shares.
(WING) stock gained 0.2% after being upgraded to Buy from Neutral at BTIG.
(SHW) stock rose 0.3% after upgrading to Buy from Underperform at Bank of America.
United parcel service
The stock (UPS) gained 1.1% after being overweight neutral at JPMorgan.
(FSLY) stock fell 1.4% after being downgraded to Perform from Surperformer at Oppenheimer.
Write to Jacob Sonenshine at [email protected]