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Market Snapshot: S&P 500 carves out intraday record, Nasdaq retakes 14,000 as inflation rise at fastest rate since 2008 seen as short-lived

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U.S. stock benchmaks were rising toward record highs Thursday morning, despite evidence of mounting inflation pressures in America, accelerating at their fastest pace in years. The climb in stocks and fairly muted response in the bond market to consumer prices implies that investors are harboring the belief that pricing pressures won’t be sustained.

What are major benchmarks doing?
  • The Dow Jones Industrial Average
    DJIA,
    +0.43%

    rose 242 points, or 0.7%, to 34,690.50.
  • The S&P 500
    SPX,
    +0.50%

    advanced 28 points, or 0.7%, at 4,247, notching its first intraday record since May 7.
  • The Nasdaq Composite Index
    COMP,
    +0.62%

    gained 109 points, or 0.8%, to around 14,018.

On Wednesday, stocks ended slightly lower, with the Dow falling 152.68 points, or 0.4%, to close at 34,447.14. The S&P 500 gave up a modest early gain that pushed the large-cap benchmark slightly above its previous record close of 4,232.60 set on May 7 to finish the day down 0.2%. The Nasdaq Composite closed 0.1% lower.

What’s driving the market?

U.S. stocks were record bound on Thursday, shaking off a report that showed that cost of living surged in May, driving the pace of inflation to a 13-year high of 5%, as the economy fully reopens from the COVID pandemic.

The rate of inflation over the past year escalated to 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 as it is now was in 1991.

The consumer-price index jumped 0.6% last month to mark the fourth increase in a row, the government said Thursday. Economists polled by Dow Jones and The Wall Street Journal had forecast a 0.5% advance.

Still, investors appeared to take heart in inflation being a short-lived phenomenon, with the current reports on price increases, highlighting so-called base effects, when weaker months of inflation were phased out from yearly measures as time passed, leading to mechanically higher price levels.

Mike Loewengart, managing director investment management at E-Trade Financial said that there is a lot of latent appetite that is being released after months of COVID-related lockdowns.

“Keep in mind that as we start to make our way back to a full economic recovery, there is pent up demand and supply constraints from raw material and labor shortages,” the strategist wrote. “This creates the type of inflation that the Fed believes is transitory, meaning it too shall pass,” he added.

Stocks had mostly been locked in narrow range near all-time highs, as investors try to gather more insight about the outlook for the economy in the aftermath of the public health crisis that hobbled the global economy for a year.

However, inflation worries appeared to be fading as measured by Thursday’s early morning moves. The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.494%

on Wednesday fell to its lowest level since early March but was heading up Thursday at around 1.52%.

A hotter-than-expected jump in the April CPI briefly rattled markets last month, sparking concerns over the potential for runaway inflation and the possibility the Federal Reserve could move sooner than anticipated to slow its bond purchases.

A separate report on weekly initial jobless claims fell 9,000 to 376,000 in the week ended June 5, the Labor Department said Thursday, marking the lowest level of claims since March 2020. Economists surveyed by The Wall Street Journal had forecast new claims to fall to a seasonally adjusted 370,000.

Meanwhile, the ECB on Thursday offered few surprises, keeping interest rates unchanged and leaving the size of its asset-purchase programs unchanged, as expected. The ECB said it expected to continue to buy assets under its pandemic emergency purchase program, or PEPP, at a “significantly higher” pace than seen in the early months of this year.

Meme stocks were also in focus after GameStop Corp.
GME,
-10.05%

late Wednesday disclosed that the Securities and Exchange Commission had asked for its cooperation with an investigation into the unprecedented volatility its stock has seen in recent months. It also suggested it isn’t the only one being probed.

Looking ahead, May U.S. federal budget figures are due at 2 p.m. Eastern.

See also: BANG stocks take a hit after GameStop discloses regulators on investigating

Which companies are in focus?
  • GameStop late Wednesday appointed two Amazon.com Inc.
    AMZN,
    +1.27%

    officials as its new top executives, shortly after private-equity investor Ryan Cohen was voted the company’s chairman of the board. The company also disclosed plans to sell more shares. The popular meme stock was down more than 5% in premarket trade. Shares were down over 9%
  • Other meme stocks were mixed AMC Entertainment Holdings Inc.
    AMC,
    +1.16%

    up 2.5%; BlackBerry Ltd.
    BB,
    -2.70%

    down 1.3%; Koss Corp.
    KOSS,
    -4.67%

    down 3.9%; and Nokia Corp.
    NOK,
    -0.64%

    off less 1%.
  • Shares of RH
    RH,
    +15.22%

    were up 14% after the retailer formerly known as Restoration Hardware topped earnings expectations again at the beginning of 2021, and lifted its forecast for the year.
How are other assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y was 1.6 basis points higher at around at 1.50%, hovering around its lowest level since March. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was 0.1% lower.
  • Oil futures CL00 advanced, with West Texas Intermediate crude for July delivery up 57 cents, or 0.8%, at $70.51 a barrel. Gold futures GC00 edged lower by $2.20, or about 0.1%, at $1,893.30 an ounce.
  • European equities rose slightly, with the pan-Continental Stoxx Europe 600
    SXXP,
    +0.15%

     up 0.2%. London’s FTSE 100
    UKX,
    +0.25%

    climbed 0.4%.
  • In Asia, the Shanghai Composite SHCOMP closed 0.5% higher, Hong Kong’s Hang Seng Index HSI ended virtually unchanged and Japan’s Nikkei 225 NIK picked up 0.3%.

Metals Stocks: Gold prices fall with Treasury yields up as pace of U.S. inflation hits 13-year high

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