Stocks Shrug Off High Inflation Data, Dow & S&P500 at Records

12 Aug 2021 · 3rd Party Analysis

Stocks Shrug Off High Inflation Data, Dow & S&P500 at Records

WRITTEN BY ThorFX

In Summary

  • Dow Jones adds over 220 points, notches a new all-time high along with the S&P500
  • Cryptocurrencies topped the $2tn market cap on Wednesday as the sprint shifted gears

The Dow Jones Industrial Average and the S&P500 pressed forward on Wednesday, setting back-to-back closing highs after key inflation data did not seem to worry investors.

Stocks from real-economy sectors led the gains, among them Caterpillar, Home Depot, Boeing, and others poised to benefit from the $1tn infrastructure package approved in the Senate a day earlier. The move higher in the S&P500 and the Dow during Wednesday’s session built on records set the previous day.

The financial sector added 1.2%, reaffirming its strong positioning when it comes to investors looking to dive into value stocks. Industrial stocks led the S&P500 higher, gaining 1.3%, along with the material sector, advancing 1.4%.

Technology stocks, also considered growth investments, were brushed aside as market participants preferred potential beneficiaries of infrastructure spending.

The Dow Jones Industrial Average added 220.30 points, or 0.62%, to 35,484.97, a new record close for the blue-chip index. The S&P500 gained 10.95 points, or 0.25%, to finish trading at a fresh all-time high of 4,447.70. The Nasdaq Composite was largely pressured throughout the session and ended the day lower by 22.95 points, or 0.16%, to 14,765.14.

European Stocks Continue Impressive Performance

Besides the infrastructure budget boosting the Dow and the S&P500, new inflation data also helped buoy stocks for another day. The US consumer price index gained 5.4% in July from a year earlier. The rate of inflation was above analyst estimates, which forecasted price increase would land at 5.3%.

More importantly, the core rate of inflation rose by 0.3%, below the 0.4% expected. Core inflation excludes the often-volatile prices of energy and foods, which are now largely influenced by the economic reopening. The lower-than-expected core inflation increase suggested that while overall inflation remains at a 13-year high, the peak in inflation growth may have already hit the US.

The fresh inflation reading would be added to the flurry of reports and economic data piled by Fed officials as they weigh the prospects for tapering, or winding down, the monthly asset purchases. The Federal Reserve has already signaled it is preparing to dive into tapering discussions, perhaps as soon as September, at the upcoming Fed policy meeting.

US futures on Thursday remain subdued and relatively flat. Futures contracts tied to the Dow Jones are virtually unchanged with about 10 points to the upside. S&P500 futures hover right under the flat line, while Nasdaq futures are negative by about 20 points.

In Europe today, stocks continue their impressive performance as investors’ expectations stay optimistic. On Wednesday, the pan-continental Stoxx 600 Europe edged up 0.42%, closing at another fresh all-time high of 474.32.

Cryptocurrencies tumbled in early Thursday trading action. Bitcoin dropped to levels near $45,000, down from $46,300, a decline of about 2.3% so far in the session. Ether was also lower this morning, sliding by over 3% to the current market price of $3,130 per coin.

The digital asset market briefly pierced through the $2tn market valuation yesterday as the rally gained new momentum.

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