Moneycontrol PRO

US markets head higher in face of more grim inflation news

The S&P 500 and the technology-weighted Nasdaq are each on track to end July with the biggest gains since November 2020.

July 29, 2022 / 07:36 PM IST
(File image: Reuters)

(File image: Reuters)

Stocks are opening slightly higher on Wall Street Friday despite news that closely watched consumer spending data jumped by the most in four decades last month.

The S&P 500 and the technology-weighted Nasdaq are each on track to end July with the biggest gains since November 2020.

Amazon is soaring after the online retailer beat analysts sales forecasts last quarter. Apple is also rising after its quarterly earnings were better than Wall Street expected. Investors are watching for new data out today on employment costs, another key signal for inflation. Oil prices rose and shares of Exxon and Chevron jumped after they reported record quarterly profits.

Earlier, the Wall Street pointed higher ahead of the opening bell Friday and major indexes are on track for their first back-to-back weekly gains in four months despite a seemingly endless string of data that points to rising inflation.

Futures for the S&P 500 gained 0.4% and futures for the Dow Jones industrials ticked up 0.1%, though both retreated from higher levels after more startling inflation data from the U.S.

Close

The government reported that an inflation gauge closely tracked by the Federal Reserve jumped 6.8% in June from a year ago, the biggest increase in four decades.

Friday’s figures from the Commerce Department underscored the persistence of the inflation that is eroding the purchasing power of Americans and dimming their confidence in the economy.

That is a troublesome trend because consumer spending is a primary driver in the U.S. economy and has been among the few bright spots as far as economic indicators.

Consumers appear to be holding steady the data released Friday shows that spending managed to just outpace inflation, rising 0.1% from May to June after adjusting for price changes.

Wall Street appears believe that the Federal Reserve may temper its aggressive interest rate hikes aimed at taming inflation after the Commerce Department reported the U.S. economy contracted at a 0.9% annual pace in the last quarter. That followed a 1.6% year-on-year drop in the first quarter.

Consecutive quarters of falling GDP are an informal, though not definitive, indicator of what economists call a technical recession.

Shares in Europe were markedly higher at midday, despite a report that inflation in the countries using the euro currency shot up to another record this month. Annual inflation in the eurozone’s 19 countries rose to 8.9% in July, an increase from 8.6% in June, according to numbers published Friday by the European Union statistics agency.

Energy prices surged by nearly 40%, fueled by Russia’s war in Ukraine, but the economy still managed better-than-expected, if meager, 0.7% growth in the second quarter.

That growth comes even as Germany, Europe’s traditional economic engine, stagnated in the April-June quarter, adding to fears that it may be on the brink of recession. Worries about energy supplies are at the center of concern about the outlook for the economy, which like many others is suffering from high inflation.

In a bid to staunch higher prices, the European Central Bank raised interest rates last week for the first time in 11 years.

At midday Friday in Europe, Germany’s DAX added 1.2%, while France’s CAC 40 rose 1.6%. Britain’s FTSE 100 gained 0.5%.

In Asia, investors were cautiously eyeing regional tensions after President Joe Biden and China’s Xi Jinping spoke for more than two hours on Thursday. China left no doubt it blames the U.S. for a deteriorating relationship, but the White House said call's aim was to “responsibly manage our differences and work together where our interests align.”

Hong Kong's Hang Seng index dropped 2.4% to 20,156.51 and the Shanghai Composite index declined 0.9% to 3,253.24 after China’s leaders said after a planning meeting that the country would stick with a zero COVID policy that has disrupted manufacturing and other business activity. That underscores the high cost Xi's government is willing to incur to stop the virus in a politically sensitive year when he is widely expected to try to extend his term in power.

Japan's benchmark Nikkei 225 inched down less than 0.1% to finish at 27,801.64, while Australia's S&P/ASX 200 gained 0.8% to 6,945.20. South Korea's Kospi added 0.7% to 2,451.50.

Japanese government data showed factory output in June jumped 8.9% from the previous month, marking the first rise in three months. The recent easing of pandemic lockdowns in China has helped boost Japanese production.

In other trading, benchmark U.S. crude gained $2.08 to $98.50 a barrel in electronic trading on the New York Mercantile Exchange. It lost 84 cents to $96.42 on Thursday.

Brent crude, the international pricing standard, gained $2.19 to $104.02 a barrel.

Oil companies have been pulling in record profits the last few months, at a time when Americans struggled to pay for gasoline, food and other basic necessities.

On Friday, Exxon Mobil booked an unprecedented $17.85 billion profit for the second quarter and Chevron made a record $11.62 billion. The sky-high profits come one day after the U.K.’s Shell shattered its own profit record. Shares in Exxon and Chevron each rose more than 3% before the bell Friday.

In currency trading, the U.S. dollar fell to 133.78 Japanese yen from 134.27 yen late Thursday. The euro cost $1.0198 down from $1.0199.
Associated Press
first published: Jul 29, 2022 07:36 pm
Sections
ISO 27001 - BSI Assurance Mark