The Ultimate Guide to Investing: US Stocks Fall Despite Cooling Inflation Data
In a surprising turn of events, US stocks fell on Thursday, despite cooling inflation data that pointed to a potential slowdown in the US economy. The S&P 500 retreated from its record-setting level to close at 5,584.54, while the Dow Jones Industrial Average also saw a decline, ending at 18,283.41. On the other hand, the Nasdaq edged up slightly, closing at 39,753.75.
Small-cap stocks experienced a significant rally, fueled by expectations of a Federal Reserve rate cut in September and hopes for an economic soft landing. Following the release of the Consumer Price Index (CPI) data, Treasury yields dipped as traders increased their bets on forthcoming interest rate cuts.
The CPI data showed a 0.1% decrease on a monthly basis, lower than the expected increase, and a 3% annual increase, also below expectations. The core CPI figure, which excludes volatile food and energy components, rose just 0.1% on a monthly basis and gained 3.3% annually. These figures added to expectations that the Federal Reserve could start cutting rates as soon as September.
While the main indices on Wall Street reached new record highs earlier in the week, there are still concerns about the economy. Fed Chair Jerome Powell noted a recent cooling in the US economy but expressed confidence in a soft landing. However, some Fed officials have expressed caution about the need for more evidence of cooling inflation before voting for rate cuts.
The new US quarterly earnings season is set to begin, with major companies like PepsiCo reporting disappointing sales figures, while Delta Air Lines forecast lower profits. On the other hand, companies like WD-40 Company and Alcoa reported strong earnings.
Crude prices fell on Thursday after a bearish report from the International Energy Agency, despite other positive factors like the muted US inflation and a drop in US inventories. The IEA forecasted a slowdown in global oil demand growth, citing economic problems in China as a contributing factor.
In conclusion, the current market conditions suggest a potential rate cut by the Federal Reserve in September, which could have a significant impact on various sectors of the economy. Investors should closely monitor the upcoming Fed policy-setting meeting and quarterly earnings reports to make informed decisions about their investments.