S&P 500 Sets New Record Closing High Following Inflation Data

Stocks fluctuated over the course of the trading session on Thursday but largely maintained a positive bias on the day before closing mostly higher. With the upward move, the S&P 500 reached a new record closing high.

The major averages all closed in positive territory, although the Dow inched up just 19.10 points or 0.1 percent to 34,466.24. The tech-heavy Nasdaq advanced 108.58 points or 0.8 percent to 14,020.33 and the S&P 500 rose 19.63 points or 0.5 percent to 4,239.18.

The higher close on Wall Street came following the release of a highly anticipated Labor Department report showing a bigger than expected increase in consumer prices in the month of May.

The Labor Department said its consumer price index rose by 0.6 percent in May after climbing by 0.8 percent in April. Economists had expected consumer prices to increase by 0.4 percent.

Excluding food and energy prices, core consumer prices climbed by 0.7 percent in May following a 0.9 percent advance in April. Core prices were also expected to rise by 0.4 percent.

The report also showed consumer prices in May were up by 5.0 percent compared to the same month a year ago, reflecting the biggest spike since August of 2008.

The annual rate of core consumer price growth also accelerated to 3.8 percent in May, which represents the biggest jump since June of 1992.

“Price increases stemming from the reopening of the economy and ongoing supply chain bottlenecks will keep the rate of inflation elevated and sticky as supply/demand imbalances are only gradually resolved,” said Kathy Bostjancic, Chief U.S. Financial Economist at Oxford Economics.

She added, “While we share the Fed’s view that this isn’t the start of an upward inflationary spiral, we look for inflation to remain persistently above 2% through 2022.”

Adding to positive sentiment about the economy, the Labor Department released a separate report showing another modest decrease in first-time claims for unemployment benefits.

The report showed initial jobless claims edged down to 376,000, a decrease of 9,000 from the previous week’s unrevised level of 385,000. Economists had expected jobless claims to dip to 370,000.

With the slight drop, jobless claims once again fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

Sector News

Gold stocks moved sharply higher over the course of the session, resulting in a 2.7 percent spike by the NYSE Arca Gold Bugs Index.

The rally by gold stocks came amid a modest increase by the price of the precious, with gold for August delivery inching up $0.90 to $1,896.40 an ounce.

Substantial strength was also visible among biotechnology stocks, as reflected by the 2.4 percent jump by the NYSE Arca Biotechnology Index. The index ended the session at its best closing level in almost four months.

Pharmaceutical, software and semiconductor stocks also saw considerable strength on the day, while housing, airline and banking stocks showed notable moves to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index rose by 0.3 percent, while China’s Shanghai Composite Index climbed by 0.5 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index inched up by 0.1 percent, the German DAX Index edged down by 0.1 percent and the French CAC 40 Index fell by 0.3 percent.

In the bond market, treasuries turned positive over the course of the session after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3 basis points to 1.459 percent after reaching a high of 1.533 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to the University of Michigan’s preliminary report on consumer sentiment in the month of June.

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