Market Update: Wall Street Ends Higher, Extending Recent Gains Amid Cooling US Inflation

Key Takeaways

1. Tech-related Shares Rally as US Inflation Cools Down
2. June Producer Prices Show Minimal Rise; Core PPI Subsides
3. Dow, S&P 500, and Nasdaq Close with Gains of 0.1%, 0.9%, and 1.6%, respectively

The US stock market continued its upward momentum on Thursday, with the Nasdaq experiencing its second consecutive day of over 1% growth. This surge came after data revealed that the annual increase in US producer inflation was the smallest it had been in almost three years. The latest reports provide further evidence of subsiding inflation pressures. Additionally, the Consumer Price Index (CPI) report published on Wednesday indicated that US consumer prices had witnessed their smallest annual increase in over two years. As a result, market sentiment suggests that the Federal Reserve will halt its rate hikes after the anticipated 25 basis points increase later this month.

Mona Mahajan, Senior Investment Strategist at Edward Jones, stated, "PPI is another confirmation this week that inflation continues to trend in the right direction even as we see better overall labour market and consumer data. That is a good sign."

The producer price index showed a modest climb of 0.1% over the 12 months leading up to June. This marks the smallest year-on-year gain since August 2020, following a 0.9% increase in May.

The S&P 500 received significant support from technology-related shares, particularly megacaps, which gained 2.7% and achieved a record-high closing. Additionally, US chip stocks rallied, with Nvidia reaching a new all-time high during the session and the Philadelphia semiconductor index rising by 2%.

Despite the generally positive tone of the day, a separate report revealed an unexpected decrease in weekly jobless claims, indicating a persistently tight labour market.

Inflation and Market Performance

The Dow Jones Industrial Average rose by 47.71 points, or 0.14%, closing at 34,395.14. The S&P 500 gained 37.88 points, or 0.85%, ending at 4,510.04, while the Nasdaq Composite added 219.61 points, or 1.58%, reaching 14,138.57.

Source from Reuters 

US chip stocks, including Nvidia, experienced significant gains, with Nvidia attaining a new record high during the session. The Philadelphia semiconductor index also rose by 2%.

Despite the optimistic outlook, a separate report indicated an unexpected decline in weekly jobless claims, suggesting a tight labour market.

Market focus is now shifting to the second-quarter US earnings season, which commences this week. JPMorgan Chase, whose quarterly results are due before the opening bell on Friday, witnessed a 0.5% increase in its share value.

Alan Lancz, President of Alan B. Lancz & Associates Inc. in Toledo, Ohio, stated, "We might have another quarter here where the positive sentiment will continue. As long as expectations and guidance are in line, that's what a lot of institutional investors will be looking at."

Delta Air Lines remained relatively stable after an initial increase due to news of a raised full-year profit outlook attributed to the ongoing post-pandemic travel boom. PepsiCo shares rose by 2.4% after the company revised its annual revenue and profit forecasts for the second time.

Google parent Alphabet Inc witnessed a significant surge of 4.7% in its shares. The company announced the launch of its artificial intelligence chatbot, Bard, in Europe and Brazil, alleviating concerns regarding regulatory issues overseas.

Market strategists have highlighted that the recent weakness in the US dollar may have positive implications for the future earnings of US multinational companies.

The total trading volume on US exchanges amounted to 10.82 billion shares, slightly lower than the 11.11 billion average for the last 20 trading days. Advancing issues outnumbered declining ones on the NYSE with a ratio of 2.90-to-1, while on the Nasdaq, advancers had a 1.93-to-1 ratio advantage.

The S&P 500 witnessed 51 new 52-week highs and one new low, while the Nasdaq Composite recorded 135 new highs and 39 new lows.