Stocks End Higher, S&P 500 Hits Intra-day record High
4:10 pm Thursday, June 10th, 2021
US stocks pushed higher on Thursday despite data showing inflation rising above expected which could push policymakers to rethink their stimulus measures.
Starting with the data, total CPI rose 0.6% m/m in May (consensus 0.4%) while core CPI, which excludes food and energy, rose 0.7% m/m (consensus 0.4%). On a year-over-year basis, total CPI was up 5.0% and core CPI was up 3.8%. In addition, weekly initial claims declined to a post-pandemic low at 375,000 (consensus 365,000).
Cyclical stocks keyed off the data early on as it supported reflationary themes, but they have since swapped leadership positions with the S&P 500 information technology sector (+0.7%) and counter-cyclical sectors like health care (+1.6%), consumer staples (+0.8%), and real estate (+0.7%).
The financials (-0.4%) and industrials (-0.1%) sectors are the only sectors trading lower right now, giving up early gains.
This intraday rotation has been fueled in part by the peculiar behavior of the Treasury market. The 10-yr yield reasonably jumped to 1.53% soon after the CPI report, but it’s now trading at 1.48%, or one basis point below yesterday’s settlement.
Supposedly, the Treasury market is sticking with the view that inflation pressures will eventually subside and prove to be transitory like the Fed has consistently stated. Peak growth concerns could be in the mix, too. Whatever the case, the turnaround in longer-dated yields has benefited growth stocks and has hurt financial stocks.
As an aside, the level to watch is 4232.60 for the S&P 500. This is its closing record high and has acted as strong resistance every day this week. The benchmark index is currently trading above this level.
Total CPI increased 0.6% month-over-month in May (Briefing.com consensus 0.4%), with a 7.3% increase in the index for used cars and trucks accounting for about one-third of that increase. Core CPI, which excludes food and energy, jumped 0.7% (Briefing.com consensus 0.4%). On a year-over-year basis, total CPI was up 5.0% (vs. 4.2% in April), which was the largest increase since August 2008. Core CPI was up 3.8% year-over-year (vs. 3.0% in April), which was its largest increase since June 1992!
Initial claims for the week ending June 5 decreased by 9,000 to 375,000 (Briefing.com consensus 365,000), hitting their lowest level since March 14, 2020. Continuing claims for the week ending May 29 decreased by 258,000 to 3.499 million, which is the lowest since March 21, 2020.
