NEW YORK (AP) — Wall Street is continuing its winning streak this week as evidence suggests that inflation is easing its grip on the economy.
The S&P 500 is up 0.6% in early trading, on track for its seventh winning week out of the last nine. The Dow Jones Industrial Average is up 104 points, or 0.3%, at 34,451 as of 10 a.m. Eastern time, and the Nasdaq composite is up 1%.
Stocks are gaining momentum after data indicating that inflation is slowing, potentially prompting the Federal Reserve to end its streak of interest rate hikes soon. Inflation at the wholesale level slowed more than expected in June, with prices paid by producers only 0.1% higher than the previous year. This marks a significant decrease from the 11.2% inflation experienced last summer.
High inflation has been a major concern for investors, as the Federal Reserve had been aggressively raising interest rates to combat it. High rates can slow the entire economy and increase the risk of a recession, negatively impacting investments and causing unexpected disruptions. However, there is growing confidence among traders that the upcoming rate increase will be the last in the current cycle, thanks to this week’s inflation data.
On Wednesday, a report showed that consumer prices in June were 3% higher than the previous year, down from over 9% inflation last summer.
As a result, Treasury yields have been falling in the bond market as traders adjust their expectations for future Fed rate hikes. The 10-year Treasury yield is now at 3.80%, down from 3.86% on Wednesday and 3.98% on Tuesday.
Easing interest rates benefit various investments, including stocks, bonds, and cryptocurrency. However, high-growth stocks such as Amazon, Microsoft, and Nvidia stand to benefit the most. These stocks have seen significant gains on the S&P 500, with Amazon up 1.9%, Microsoft up 0.9%, and Nvidia up 1.9%.
PepsiCo also saw a slight increase of 0.1% after beating profit expectations for the spring. While the company experienced lower demand for drinks and snacks, higher prices helped boost earnings. PepsiCo also raised its full-year forecasts.
On the other hand, Delta Air Lines initially saw gains after reporting record profit and revenue for the latest quarter. However, it later slipped 0.3% as some forecasts predicted a decline in spending. Despite this, strong demand from travelers continues into the current quarter.
JPMorgan Chase will kick off the earnings reporting season for banks on Friday, providing insight into their performance during the spring. Overall expectations are low, with analysts forecasting a sharp drop in earnings for S&P 500 companies, the biggest decline since the height of the pandemic in 2020. However, if companies can surpass these expectations, it may further boost Wall Street’s upward momentum and alleviate concerns of an impending recession.
Exxon Mobil experienced a 1.4% decline on Wednesday after announcing its purchase of Denbury for $4.9 billion in stock. Denbury, which owns carbon dioxide pipelines, saw a 0.6% drop in its stock.
In Asia, Hong Kong’s Hang Seng rose 2.6% and stocks in Shanghai gained 1.3% despite China reporting a decline in trade for June. Chinese exports fell 12.4% compared to the previous year, driven by weakened demand following interest rate hikes aimed at curbing inflation.
Meanwhile, the Kospi in South Korea rose 0.6% after the Bank of Korea maintained its policy interest rate but acknowledged the accelerating risk of inflation.
Stocks in Europe also saw modest gains.
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AP Business Writers Yuri Kageyama, Matt Ott, and Zen Soo contributed.
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