Positive inflation data boosts Wall St
Wall Street managed a small advance for a second straight session today after the US government released benign inflation figures.
Investors who had waited anxiously for the Labour Department’s inflation report were pleased by the 0.6% drop in the Producer Price Index. Economists had forecast an 0.2% decrease. But May retail sales data, reported by the Commerce Department, fell a disappointing 0.5%, more than the 0.2% analysts expected.
The mixed economic data implies “that the Federal Reserve may continue to raise short-term interest rates at a measured pace, but they may pause periodically”, said Hugh Johnson, chief investment officer at Johnson Illington Advisors. “That’s good news for the economy, for earnings and stock prices.”
The Dow Jones industrial average rose up 25.01, or 0.24%, at 10,547.57 after rising just under 10 points yesterday.
Broader stock indicators also gained ground. The Standard & Poor’s 500 index was up 3.09, or 0.26%, at 1,203.91, and the tech-heavy Nasdaq composite index climbed just 0.08, nearly flat, to 2,069.04. The Nasdaq was lower most of the session as investors took profits in the recently active technology sector.
Bonds sold off as stocks rose, with the yield on the 10-year Treasury note rising to 4.11% from 4.09% late yesterday. The dollar was mixed against other major currencies, and gold prices fell.
Crude oil futures dropped modestly after reaching a seven-week high yesterday, but prices remained around 55 US dollars per barrel as investors awaited pricing and production news from Opec from its regular meeting and from the US inventory report, both coming Wednesday. A barrel of light crude settled at 55 dollars, down 62 cents, on the New York Mercantile Exchange.
While crude oil prices remain unusually high, the Producer Price Index showed that higher petrol prices were not feeding inflation – fears of which weighed heavily on the markets earlier in the year.
However, with retail sales declining, investors worried that the high energy costs were instead eating into consumers’ disposable income.
That left the indexes unable to stage a major advance, though stocks managed to add to yesterday’s meagre gains. But investors had been hoping that this week’s raft of economic data would provide the necessary impetus to lift stocks further. Now, however, investors may be holding off until the end of the quarter before making any large bets on stocks.
Advancing issues outnumbered decliners by more than 5 to 3 on the New York Stock Exchange, where volume came to 1.32 billion shares, compared with 1.27 billion traded yesterday.
The Russell 2000 index of smaller companies was up 5.37, or 0.8%, at 634.39.
