Stocks Jump Again After Inflation Data
4:10 pm Wednesday, August 11th, 2021
The S&P 500 and Dow Jones Industrial Average have set all-time highs today, partly due to a better-than-feared Consumer Price Index (CPI) report for July.
Briefly, total CPI increased 0.5% m/m in July, as expected, while core CPI, which excludes food and energy, increased 0.3% m/m (Briefing.com consensus 0.4%). On a year-over-year basis, total CPI was unchanged at 5.4% and core CPI moderated to 4.3% from 4.5%.
The report has given some tolerance for Fed Chair Powell’s view of inflation pressures being transitory, but interestingly, the Treasury market continues to see selling interest. The 10-yr yield is currently up two basis points to 1.36% and is up for the sixth straight session.
Expectations for this upwards trend in rates to continue has contributed to another day of rotation from growth stocks into value stocks. The Russell 1000 Value Index is up 0.4% while the Russell 1000 Growth Index is down 0.4%.
The cyclical financials (+0.9%), materials (+0.9%), industrials (+0.8%), and energy (+0.6%) sectors are among the top performers today. Conversely, the health care (-0.8%) and information technology (-0.1%) sectors underperform amid weakness in the biotechnology and semiconductor stocks.
There are some growth-stock exceptions, though, like Apple (AAPL) and Microsoft (MSFT), which can be interpreted as investors seeing the two biggest stocks in the market as places of relative safety in the growth-stock space. Coinbase (COIN) was up 6% on some good earnings news.
Separately, Kansas City Fed President George (2022 FOMC voter) said the Fed should consider dialing back its accommodative policy, echoing comments from Atlanta Fed President Bostic (2021 FOMC voter) and Boston Fed President Rosengren (2022 FOMC voter) earlier this week.
