Stocks took a breather today as major indexes gave up their earlier gains. The Dow and the S&P 500 were almost unchanged, and the Nasdaq was down 0.6% at close, after an impressive rally yesterday.
The inflation reports released yesterday and today were softer than expected and raised hopes that they may lift the pressure off the Federal Reserve to raise rates aggressively.
The CPI index rose 8.5% in July from a year ago, down from 9.1% increase in June, thanks mainly to the decline in energy prices. Food and shelter costs remained high but used car prices and airline fares have come down.
The national average for gas prices fell below $4 per gallon for the first time since March. The average had surged 11.2% in June.
The PPI index, released this morning, was up 9.8% in July from a year ago, versus 11.3% spike in June. Both these reports, which reflect consumer and producer prices, now suggest that inflationary pressures could be easing finally.
Treasury yields and the dollar declined as the Fed funds futures now suggest a 50-basis points interest-rate hike in September, versus a 75-basis points earlier.
The Nasdaq rallied 2.8% yesterday and entered a new bull market, up more than 20% from its low in mid-June. This ended the recent bear market that was the longest since 2008.
Jobless claims increased by 14,000 to 262,000 last week, slightly better than the consensus estimate of 265,000 claims and their highest level so far this year. Weekly claims have been on an upward trend since hitting a 50-year low in March.
The jobs report for the month of July was much hotter than expected. The economy added 528,000 positions, trouncing the consensus estimate of addition of 258,000 jobs. The unemployment rate fell to 3.5%, the lowest level in five decades.
The average rate on the 30-year fixed mortgage increased to 5.22% from 4.99% last week, per Freddie Mac. While down from the 5.81% rate in June, it is still up 2% from the start of the year.
ETF Update
Strive Asset Management, the “anti-woke” firm backed by high profile investors like Peter Thiel and Bill Ackman, launched the Strive U.S. Energy ETF (DRLL), which would encourage oil and companies to “drill more and frack more.”
“The largest investment companies in the world are using your money, your investments, to tell American energy companies to produce less oil and to frack for less natural gas,” said CEO Vivek Ramaswamy and by investing in DRLL, investors can counter this.
Direxion launched a 2X Electric and Autonomous Vehicles ETF. EVAV holds charging station manufacturers, companies involved in software development and manufacture of electrical components, and electric/autonomous vehicle manufacturers.
Sprott Asset Management launched the first ESG Gold ETF (SESG) which will “source gold from companies and mines that meet ESG screening criteria,” according to the issuer.
Portfolio Update
The S&P 500 rose 1.3%, the Dow was up 500 1.9% while the Nasdaq gained 0.5% since our last update.
Oil and commodity ETFs had a strong performance with XOP, XLE and PDBC up 11%, 8.7% and 5.1%. Regional Bank ETF (KRE) was up 5.2% and the Healthcare ETF (XHE) rose 4.7%. Our mid cap and small cap ETFs AIRR, EZM, VBR and RZV all rose more than 3%.
Have a great evening,
Neena
