Traders are hoping U.S. inflation has peaked.
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The stock market couldn’t hold on to its earlier gains Thursday, ending mixed. It had been surging as recent economic data indicated inflation may have peaked.
The Dow Jones Industrial Average ended up 27 points, or 0.1%. The S&P 500 initially gained, then dropped 0.1%, and the Nasdaq Composite was gave up its gain to end down 0.6%.
Although some technology stocks pulled the Nasdaq and S&P 500 down, most stocks were able finish higher. The Invesco S&P 500 Equal Weight Exchange-Traded Fund (RSP), which weights each stock in the index equally and therefore shows the movement of the average stock, gained 0.5%.
That comes after all three indexes soared Wednesday, with the Nasdaq gaining more than 2% after the consumer price index rose less than expected in July.
The gains this week continue a longer run for the stock market, which had already been optimistic that evidence would point to peak inflation. The S&P 500 came into Thursday’s trading up 16% from its mid-June intraday low for the year. The hope is that cooling inflation will make the Federal Reserve more likely to slow down the pace of interest rate hikes.
Overall, “Investors are certainly in a more upbeat mood as the relief from the US inflation data ripples through the markets,” wrote Craig Erlam, senior market analyst at Oanda.
That narrative got another boost Thursday. The producer price index for July gained 9.8% year over year, below expectations for 10.4% and below June’s result. That further validates the peak inflation thesis, as companies would raise prices at a slower pace, given that their costs are rising at a slower pace.
“The data keep piling up that the corner has been turned on inflation,” wrote Jamie Cox, managing partner at Harris Financial Group. “The Federal Reserve no longer needs to apply emergency brake monetary policy, and that’s a good thing.”
On the negative side, PPI rose faster than CPI. That means companies’ profit margins are getting squeezed. The good news is that the gap between the two was slimmer than expected.
On the earnings front, Walt Disney (ticker: DIS) reported better-than-expected fiscal third-quarter earnings and subscriber growth. The media and entertainment giant also said it would raise the price of its Disney+ streaming service starting in December and introduce a cheaper ad-supported tier. Disney shares jumped 4.8%.
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Here are some stocks on the move Thursday:
Sonos (SONO) fell 25% after the producer of wireless speakers and other audio products posted weak revenue in the fiscal third quarter and reduced its outlook, citing the impact of a tougher macroeconomic environment.
Six Flags Entertainment (SIX) stock dropped 18% after the company reported a profit of 53 cents a share, missing estimates of $1.01 a share, on sales of $435.4 million, below expectations for $459.8 million.
Coupang (CPNG) fell 5,2%, reversing earlier gains, after the South Korean e-commerce company boosted its earnings forecast for 2022.
Bumble (BMBL) slid 8.6% after the online-dating company’s forecast for fiscal third-quarter revenue missed Wall Street expectations.
Fiserv (FISV) stock gained 1.3% after getting upgraded to Outperform from In-Line at Evercore.
Write to Joe Woelfel at joseph.woelfel@barrons.com and Jacob Sonenshine at jacob.sonenshine@barrons.com
