Stocks struggle to hold gains after S&P 500 pushes further into record territory

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© Angela Weiss/Agence France-Presse/Getty Images


Angela Weiss/Agence France-Presse/Getty Images

U.S. stocks struggled to hold gains Friday after the S&P 500 initially extended a push into record territory a day after data showed inflation continues to run hot.

What are major benchmarks doing?

  • The Dow Jones Industrial Average erased an early rise to fall 30.36 points, or 0.1%, to 34,435.88.
  • The S&P 500 flipped between small gains and losses, last trading down 0.1 point at 4,239.08 after trading as high as 4,248.38.
  • The Nasdaq Composite remained up 21.14 points, or 0.2%, at 14,041.48.

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14,041.48 21.14 / 0.15%

On Thursday, stocks ended higher, with the S&P 500 gaining 0.5% to close at a record, taking out its previous all-time high finish set on May 7. The Dow Jones Industrial Average eked out a gain of 19.10 points, or 0.1%, while the Nasdaq Composite advanced 0.8%.

What’s driving the market?

Stocks and government bonds were building on a Thursday rally that came despite data showing the rate of U.S. consumer inflation over the past year escalated to a 13-year high of 5% from 4.2% in the prior month. That put it at the highest level since 2008, when the cost of oil hit a record $150 a barrel. Before that, the last time inflation was as high was in 1991.

“Could it mean that the market is wrong expecting an imminent downturn in inflation in the coming months?,” asked Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“It could be, but the market remains firm on its position: inflation should ease shortly as two leading factors, the secondhand car prices, which explain a part of the current jump in U.S. CPI, should ease, and energy and commodity [prices] should consolidate, and ideally pull back from their multiyear high levels,” she said in a note.

That helps explain why the 10-year U.S. Treasury yield slumped below 1.45% despite the inflation rise, the analyst said.

“US stocks are edging higher as investors anticipate a slightly less dovish Fed at next week’s FOMC policy decision,” said Edward Moya,Senior Market Analyst, The Americas, at OANDA. ” The next few trading sessions will likely see modest positioning ahead of the FOMC, with investors fixating over how discussions over tapering have begun. Fed’s Harker, Kaplan, Quarles, and Mester have all signaled now is the time to start thinking about tapering.”

Read: U.S. Treasury yields fall despite higher inflation: Here are some reasons why

Meanwhile, a bipartisan group of senators — five Democrats and five Republicans — are pushing an infrastructure plan with $579 billion in new spending as negotiators try to strike a nearly $1 trillion deal on President Joe Biden’s top priority, according to those briefed on the plan.

Talks between Biden and Senate Republicans broke down earlier this week.

In U.S. economic data on Friday, the preliminary estimate of the index of consumer sentiment released Friday by the University of Michigan rose to 86.4 in June versus 82.9 in May. The figure came in above expectations from economists polled by The Wall Street Journal, who forecast the indicator to increase to 84.4.

The survey found inflation remained a top worry for consumers, though expectations for the U.S. inflation rate eased somewhat. In the next year, consumers expect prices to increase 4% compared with a 4.6% in May. For the next five years, inflation is expected to rise by 2.8%, down from 3% the prior month.

The small rise in the consumer-confidence index coupled with the slight drop in expected inflation suggests households might not be as overly worried about surging inflation, said Michael Pearce, senior U.S. economist at Capital Economics, in a note.

“But the details of the survey reveal widespread concern about surging home and auto prices, which could act as a brake on real consumption growth in the months ahead,” he wrote.

Which companies are in focus?

  • Shares of Chewy Inc. fell 4% after the pet-products retailer surprised Wall Street late Thursday with a quarterly profit, but said it was facing labor shortages and supply problems that had led it to run out of some items.
  • McDonald’s Corp. said hackers stole some data from its systems in markets including the U.S., South Korea and Taiwan, the latest case of cybercriminals attacking a high-profile global company. Shares were up 1.1%.
  • Meme stocks remained in focus, with shares of AMC Entertainment Holdings Inc. up 0.7%, after falling 22.2% over the past two sessions. The stock and other meme stocks, took a hit Thursday after GameStop Corp.  disclosed that the Securities and Exchange Commission was looking into the “trading activity” around its stock and those of other companies. GameStop’s stock rose 3% after tumbling 27.2% on Thursday. 

What are other markets doing?

  • The yield on the 10-year Treasury note erased a decline to nudge 0.2 basis point higher to 1.464%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, rose 0.5%.
  • Oil futures traded edged higher, with the U.S. benchmark up 0.4% at $70.55 a barrel. Gold futures edged lower, down 0.6% at $1,884.20 an ounce.
  • European equities rose, with the pan-Continental Stoxx Europe 600 and London’s FTSE 100 each up 0.7%.
  • In Asia, the Shanghai Composite fell 0.6%, while Hong Kong’s Hang Seng Index gained 0.4% and Japan’s Nikkei 225 saw a fractional loss.
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