Dow Jones Dips 0.11% after CPI Report Shows Rising Inflation
Quick overview
- Unemployment claims rose unexpectedly to 263,000 in August, marking the highest level in four years.
- The August CPI report indicated an increase in inflation to 2.9%, contributing to a bearish sentiment in the stock market.
- Both the Dow and S&P 500 indices experienced slight declines following the CPI data release, despite recent record highs.
- Investors may see a pullback in high-performing stocks, but a potential rebound is anticipated next week with expectations of a Federal Reserve interest rate cut.
Unemployment claims and consumer prices rose in August, surprising analysts and pointing toward higher inflation. The Dow and S&P 500 indices both dipped as a result.
The August CPI (Consumer Price Index) report released Thursday and showed that inflation is increasing due to climbing costs and higher unemployment. The three major stock market indices were all near record highs on Thursday before that data released, but on Friday we saw both the Dow and the S&P 500 tick down.
The Dow fell 0.11% while the S&P 500 lost 0.07%. The Nasdaq Composite was initially up slightly for the morning, but at the time of publication, that index was tracking down by 0.02% over the last 24 hours. It looks like the CPI data is taking the market downward for the moment, but these decreases are going to mean very little compared to the record high numbers the indices were demonstrating this week.
Unemployment Creeps Higher
The most unexpected bit of news from the August CPI report is that jobless claims had increased by 263,000 for the last week of the month. Only 235,000 were estimated, and that marks an increase of 27,000 from the last period. Unemployment is now at the highest point in about four years, which is a big reason why the stock market is looking more bearish today.
While not the only important inflation figure this week, the unemployment claims certainly stand out as the strongest one. Annual inflation is now up to 2.9%. That is an increase of 0.2% from the month before and the largest increase since the beginning of the year.
Expect Pullback on Stocks
Investors should be ready for Friday to be a mostly bearish day for the stock market. The CPI data will contribute to that, but we have seen a number of stocks hit record highs this week, and it is only natural that they will start to come down a little. We saw that with Oracle (ORCL) this week. The tech company added 35% to its stock value midweek as it made deals with several companies for major work contracts. On Friday morning, the stock fell by 3%, but of course much of the gains made during the week were still evident.
Alphabet (GOOG) likewise saw a sharp uptick in stock value this week, moving from $234 to $242, but on Friday morning, the stock fell 0.57%. There will likely be some retreat across the board for the high performing stocks today as the CPI data is processed. However, the stock market may shoot up early next week as investors prepare for the expected Federal Reserve interest rate cut.
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