Day: August 30, 2024

Stocks have moved mostly higher during trading on Friday, with the major averages all moving to the upside following the mixed performance seen in the previous session.

Currently, the Nasdaq is up 146.59 points or 0.8 percent at 17,663.02 and the S&P 500 is up 32.81 points or 0.6 percent at 5,624.77.

The narrower Dow is posting a more modest gain, up 64.15 points or 0.2 percent at 41,399.20 but is still on pace to end the session at a new record closing high.

The strength on Wall Street comes after the Commerce Department released readings on U.S. consumer price inflation that are said to be preferred by the Federal Reserve.

The report showed consumer prices increased in line with economist estimates in the month of July, while the annual rate of price growth was unexpectedly flat.

The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.2 percent in July after inching up by 0.1 percent in June. The modest increase matched expectations.

The core PCE price index, which excludes food and energy prices, also crept up by 0.2 percent in July. The uptick matched the increase seen in June as well as economist estimates.

Meanwhile, the report said the annual rates of growth by the PCE price index and the core PCE price index were both unchanged at 2.5 percent and 2.6 percent, respectively.

Economists had expected the year-over-year growth by both the PCE price index and the core PCE price index to tick up by 0.1 percentage point.

With the Fed almost universally expected to cut interest rates next month, the lack of acceleration in the yearly price growth may lead to optimism the central bank will lower rates at a faster pace.

“The further cooling of inflation could give the Fed leeway to be more aggressive with rate declines at coming meetings, especially if the labor market shows a steep deterioration,” said Nationwide Senior Economist Ben Ayers.

He added, “We still project more cautious 25 basis points cuts at the remaining three FOMC meeting of 2024, but the door is open for larger decreases if economic conditions weaken more than expected.”

A separate report released by the University of Michigan showed consumer sentiment in the U.S. improved by slightly more than previously estimated in the month of August.

The University of Michigan said its consumer sentiment index for August was upwardly revised to 67.9 from the preliminary reading of 67.8.

While the upwardly revised reading came in just below economist estimates for 68.0, the index is still a little further above the July reading of 66.4.

With regard to inflation, year-ahead inflation expectations edged down to 2.8 percent in August from 2.9 percent in July. Long-term inflation expectations were unchanged from the previous month at 3.0 percent.

Sector News

Semiconductor stocks have shown a substantial move to the upside on the day, resulting in a 2.5 percent surge by the Philadelphia Semiconductor Index.

Intel (INTC) has helped lead the sector higher, spiking by 8.7 percent after a report from Bloomberg said the chipmaker is working with investment bankers to consider various options, including a split of its product-design and manufacturing businesses.

Considerable strength is also visible among airline stocks, as reflected by the 1.6 percent gain being posted by the NYSE Arca Airline Index.

Computer hardware stocks are also seeing notable strength following recent weakness, while oil service stocks have moved to the downside amid a steep drop by the price of crude oil.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index advanced by 0.7 percent, while Hong Kong’s Hang Seng Index jumped by 1.1 percent.

The major European markets have also moved to the upside on the day. The French CAC 40 Index, the U.K.’s FTSE 100 Index and the German DAX Index are all up by 0.2 percent.

In the bond market, treasuries have shown a lack of direction after ending the previous session modestly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is unchanged at 3.867 percent.

Stocks moved mostly higher early in the session on Friday but have given back ground over the course of the trading day. The major averages have all pulled back well off their highs of the session.

The Nasdaq and the S&P 500 briefly dipped into negative territory along with the Dow but have subsequently bounced back above the unchanged line.

Currently, the major averages are turning in a mixed performance. While the Dow is down 71.79 points or 0.2 percent at 41,263.26, the Nasdaq is up 62.35 points or 0.4 percent at 17,578.78 and the S&P 500 is up 10.81 points or 0.2 percent at 5,602.77.

The early strength on Wall Street reflected a positive reaction to readings on U.S. consumer price inflation that are said to be preferred by the Federal Reserve.

The Commerce Department report showed consumer prices increased in line with economist estimates in the month of July, while the annual rate of price growth was unexpectedly flat.

The report said the personal consumption expenditures (PCE) price index rose by 0.2 percent in July after inching up by 0.1 percent in June. The modest increase matched expectations.

The core PCE price index, which excludes food and energy prices, also crept up by 0.2 percent in July. The uptick matched the increase seen in June as well as economist estimates.

Meanwhile, the report said the annual rates of growth by the PCE price index and the core PCE price index were both unchanged at 2.5 percent and 2.6 percent, respectively.

Economists had expected the year-over-year growth by both the PCE price index and the core PCE price index to tick up by 0.1 percentage point.

While the data has reinforced expectations of an interest rate cut by the Fed next month, some analysts, such as Harris Financial Group managing partner Jamie Cox, have said there is no justification for a 50 basis point rate cut.

Trades may have felt a 25 basis point rate cut in September is already priced into the markets and taken the opportunity to cash in on the early strength.

According to CME Group’s FedWatch Tool, there is a 69.5 percent chance of a quarter point rate cut next month and a 30.5 percent chance of a half point rate cut.

However, ING Chief International Economist James Knightley said, “A soft jobs report [next week] could still tip the odds in favour of a 50bp rate cut”

Sector News

Oil service stocks have come under considerable selling pressure over the course of the session, dragging the Philadelphia Oil Service Index down by 1.5 percent.

The weakness among oil service stocks comes amid a steep drop by the price of crude oil, with crude for October delivery plunging $2.17 to $73.74 a barrel.

Notable weakness has also emerged among gold stocks amid a significant decrease by the price of the precious metal, while networking and biotechnology stocks have also moved to the downside.

On the other hand, semiconductor stocks have pulled back off their highs of the session but continue to turn in a strong performance, resulting in a 1.6 percent gain by the Philadelphia Semiconductor Index.

Intel (INTC) remains up by 7.7 percent after a report from Bloomberg said the chipmaker is working with investment bankers to consider various options, including a split of its product-design and manufacturing businesses.

Chipmaker Marvell Technology (MRVL) has also soared by 9.6 percent after reporting better than expected fiscal second quarter results.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index advanced by 0.7 percent, while Hong Kong’s Hang Seng Index jumped by 1.1 percent.

Meanwhile, the major European markets ended the day slightly lower. While the French CAC 40 Index edged down by 0.1 percent, the U.K.’s FTSE 100 Index and the German DAX Index both closed just below the unchanged line.

In the bond market, treasuries have come under pressure over the course of the session after showing a lack of direction early in the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.2 basis points at 3.909 percent.