Tamer Inflation Supports 1% Rise In S&P 500 and Nasdaq

Barry Adams
28 Jul, 2023
New York City

Market averages traded higher after an alternative measure of inflation showed weakening inflation. 

The S&P 500 index and the Nasdaq Composite index gained around 1% after the personal consumption price index rose at a slower pace of 3.0%. 

Core PCE Index, which excludes food and energy, slowed to 4.1% in June, the U.S. Bureau of Economic Analysis reported Friday. 

The alternative gauge of inflation measures inflation for longer trends but also understates inflation experienced by most households in urban areas. 

On a monthly basis overall PCE Index and core PCE Index rose at a slower pace of 0.2%. 

Core PCE Index rose at the slowest pace since September 2021 and PCE Index rose at the slowest pace since March 2021. 

Leading energy companies, Exxon Mobil and Chevron reported large declines in sales and earnings reflecting lower energy prices compared to a year ago. 

Intel soared more than 5% after the struggling chipmaker returned to profitability and Ford Motor Company declined after the company said electric vehicle sales are slower-than-expected because of high costs. 

In overseas news, European markets traded sideways in cautious trading near record highs after second quarter economic growth stalled in Germany, expanded in France and slowed in Spain.  

The Bank of Japan tweaked its yield curve control policy and let the yield on 10-year Japanese government bonds rise to a nine-year high of 0.55%. 

The Central bank eased its ultra loose monetary policy after inflation picked up over the last six months and interest rate gap with the U.S. and Europe widened over the period, putting additional pressure on the Japanese yen. 

 

U.S. Indexes & Yields 

The S&P 500 index traded up 0.8% to 4,575.43 and the Nasdaq Composite rose 1.5% to 14,266.31. 

The Dow Jones Industrial Average halted its 13-day winning streak, the longest rally since 1897 or 126 years ago. 

The yield on 2-year Treasury notes increased to 4.90%, 10-year Treasury notes inched higher to 3.98% and 30-year Treasury bonds edged down to 4.04%. 

Crude oil decreased $0.28 to $78.80 a barrel and natural gas prices increased 7 cents to $2.67 a thermal unit. 

 

U.S. Stock Movers 

Intel Corporation jumped 6.7% to $36.73 after the chipmaker returned to profitability in the second quarter after losses in previous two quarters in a row. The company's third quarter sales also suggested improving sales. 

Procter & Gamble & Company added 1% to $153.60 after the household goods maker reported sales and earnings ahead of market expectations but issued a cautious fiscal 2024 sales. 

Exxon Mobil Corp declined 1.8% to $103.54  after the largest oil company reported mixed quarterly results. 

Revenue in the second quarter declined to $82.9 billion from $115.7 billion and net income attributable to shareholders fell to $7.9 billion from $17.9 billion and diluted earnings per share dropped to $1.94 from $4.21 a year ago. 

Chevron Corp fell 0.8% to $158.50 after the oil company reported lower earnings from a year ago following a decline in energy prices. 

Revenue in the second quarter fell to $48.9 billion from $68.7 billion and net income declined to $6.0 billion from $11.6 billion and diluted earnings per share dropped to $3.20 from $5.95 a year ago. 

Sweetgreen Inc declined 11.5% to $13.60 after the salad chain reported weaker-than-sales and a net loss of $27.3 million or 24 cents a share in the second quarter. 

Juniper Networks, Inc dropped 6.9% to $27.90 after the data networking products and systems maker reported second quarter earnings slightly ahead of market expectations but offered a lighter sales outlook in the third quarter.