How Inflation and Economic Data Affected the Stock Market
As a market participant, you had to weigh the impact of an unexpectedly high reading on wholesale-price inflation on Friday. The day’s session was dominated by downbeat economic data, particularly the Producer Price Index (PPI) which measures wholesale prices. PPI rose 0.3% in July, the highest reading since January and higher than the expected 0.2% increase. Meanwhile, the core PPI, which excludes volatile food, energy, and trade services prices, also rose 0.2% in July, signaling future inflation.
The disappointing PPI report came on the heels of an encouraging reading on consumer price inflation, serving as a reminder that the Federal Reserve’s fight against inflation is far from over. Economists believe that PPI is a leading indicator for consumer inflation, and the higher-than-expected reading indicates that the Fed’s target of 2% inflation is not yet achieved. It will take more positive data in the coming months to convince the Fed that inflation is under control.
These concerns led to a mixed closing in the stock market on Friday. While select pockets of strength offset some of the selling pressure, two of the three major indexes closed in the red. The Nasdaq Composite fell 0.7% to 13,644, mainly due to a sell-off in pricey tech stocks. The S&P 500 fared slightly better but still closed down 0.1% at 4,464.
However, some blue-chip stocks in the energy sector managed to perform well. Rising prices for crude oil, driven by forecasts of a supply deficit, resulted in a 0.3% increase in U.S. benchmark crude futures. As a result, oil & gas giants like Exxon Mobil, ConocoPhillips, and Chevron saw gains in their stock prices. Chevron, in particular, helped the Dow Jones Industrial Average end the day with a gain, closing up 0.3% at 35,285.
All in all, Friday’s market reaction reflects the ongoing uncertainty surrounding inflation and its potential impact on the economy. As a market participant, it is crucial to stay informed and monitor future economic data to gauge the direction of the market.
Analyst comment
Neutral news. The disappointing PPI report and concerns about inflation led to a mixed closing in the stock market, with the Nasdaq Composite falling 0.7% and S&P 500 closing down 0.1%. However, blue-chip stocks in the energy sector performed well, with gains in Exxon Mobil, ConocoPhillips, and Chevron. The market’s reaction reflects ongoing uncertainty surrounding inflation and its impact on the economy. It is crucial to monitor future economic data to gauge the market’s direction.
