Dow drops, Nasdaq rises after CPI data shows that inflation has reached a new 41-year high

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The Dow Jones Industrial Average fell on Wednesday morning, but was below its lowest levels. Meanwhile, the Nasdaq Composite Index rose in the wake data that showed U.S. Inflation reached a new 41 year high of 9.1% in July, while gasoline prices soared.

How is trading in stock indexes possible?
  • The Dow Jones Industrial Average
    DJIA,
    -0.37%

    Loss of 189 points or 0.6% to 30,792

  • The S&P 500
    SPX,
    -0.11%

    The decline was 10 points or 0.3% to 3,808

  • The Nasdaq composite
    COMP,
    +0.24%

    11.5 points gained, or 0.1% to 11276

On TuesdayDow industrials
DJIA,
-0.37%

fell 193 points, or 0.62%, to 30,981, the S&P 500
SPX,
-0.11%

The Nasdaq Composite declined 0.9% to 3,819 and the Nasdaq Composite fell 0.9%
COMP,
+0.24%

To 11,265, the drop was 0.9%

The S&P 500 has lost 83.82 points, or 2.1%, over the last three trading days.

What’s driving markets

Wednesday’s focus is still on inflation as reflected in the June consumer price Index report.

In June, gasoline prices soared The rate of U.S. Inflation was driven by these factorsThe CPI climbed to 9.1%, almost 41 years after its peak. The CPI jumped 1.3% last month to mark the third time in the last four months it’s topped 1%. The Wall Street Journal polled economists and forecast an increase of 1.1%.

“We continue to see new record highs for inflation and it will weigh heavily on the markets,” Greg Bassuk, chief executive at AXS Investments said in an interview. “We saw last month with CPI overshooting expectations, June ended up being really troubling for risk assets. And so we believe investors are increasingly concerned of even more aggressive Fed rate hikes and therefore the likelihood of exacerbating recessionary fears.”

After the CPI data was released, traders’ expectations for a 100 basis point rate hike by the Federal Reserve at its next meeting This jumped to 42%According to the CME FedWatch Tool, it rose from 7.6% Tuesday.

President Joe Biden on Wednesday said in a statement that while a “headline inflation reading is unacceptably high, it is Also, out-of-date” “Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices, that have reduced the price at the pump by about 40 cents since mid-June,” Biden said.

The International Monetary Fund on Tuesday warned that a surge in inflation poses “systemic risks” to the U.S. economy, a concern not lost on the Federal Reserve as it seeks to damp rising prices by sharply raising borrowing costs. The Fed’s tighter policy trajectory has removed liquidity from the market and helped pressure equity valuations.

Meanwhile, the U.S. corporate earnings season kicks into gear on Thursday, and investors will be watching company’s results for the second quarter, and most importantly, outlook for the rest of the year. “Based on these continued high prices in energy, the supply chain bottlenecks and corporate earnings are something that investors are going to be hyper focused on,” Bassuk said.

See: Wall Street profits expectations for megabanks are lower than earnings, due to the deep freeze in stocks

Bassuk advised that investors should consider inflation-sensitive investments to help mitigate the effects of inflation. At the same time, “we think that high volatility is going to continue to characterize July markets,” Bassuk said. According to Bassuk, investors should consider other investments that can be used to protect portfolios.

Companies that are in focus
  • Shares Delta Air Lines Inc.
    DAL,
    -6.58%

     Dropped 7.2%Wednesday’s announcement by the airline came after it reported second-quarter profits that were below expectations but which generated revenue that exceeded pre-pandemic levels and beat forecasts. In the same period of 2019, net income was $735 million or $1.15 per Share, compared to $1.44 billion or $2.21/share in 2019. 

  • Shares IronSource Ltd.
    IS,
    +47.09%

     jumped 50% Wednesday after the business app company Confirmed to be Acquired Unity Software Inc. in an all stock deal worth $4.4 trillion. Unity stock is down 3.8%

  • Polestar Automotive Holding UK PLC
    PSNYW,
    +5.34%

    Following the Swedish electric vehicle company’s announcement, shares rose by 3.9% Supported its full-year guidancefor deliveries of 50,000 vehicles, and the company provided an update on its year to date performance.

Other markets
  • Bourses across Europe mostly followed Wall Street’s overnight retreat, leaving the Stoxx 600
    SXXP,
    -1.04%

    Save 1.2%

  • The U.S. 10-year Treasury yield
    TMUBMUSD10Y,
    2.944%

    – 4 basis points, to 2.936%

  • The ICE Dollar Index
    DXY,
    -0.49%

    This was down 0.4%

  • WTI crude
    CL.1,
    +2.12%

    After losing 8.5% in the previous sessions, 1.4% was added to $97.20 per barrel. This was due to fears that slowing economic growth would impact demand.

  • Gold
    GC00,
    +1.06%

    The price of Bitcoin and $1,737 an Ounce rose 0.7%
    BTCUSD,
    +0.64%

    It was around $19,460.

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