Wall Street is only reluctant to respond to inflation data
US Inflation Data Falls Short of Expectations, Wall Street Reacts Mutedly. Dow Climbs Slightly. Tech Stocks Like Nvidia Rebound After Recent Sell-off.
Midweek US consumer price data sparked minimal buying interest on Wall Street. The Dow Jones Industrial Average rose 0.6% to 40,008 points. The S&P 500 gained 0.4%. The Nasdaq Composite recovered from early losses and closed virtually unchanged.
While the inflation rate hit its lowest level since March 2021, the data didn't surprise investors as the producer price index did the previous day. However, the data suggests a potential interest rate cut by the Federal Reserve in September. Market participants were relieved that their expectations were not disappointed. "An upside surprise would have been the most concerning outcome, as it would put the Fed in a very uncomfortable position. High inflation combined with a slowing economy could trigger further risk aversion and a flight to safe havens. In this case, bonds might not be the winners," noted ING's bond strategist Benjamin Schroeder.
Risk aversion may increase if the Middle East conflict escalates militarily. Israel and the US continue to prepare for an Iranian attack, while the US pressures Israel to achieve a ceasefire between Hamas and Israel in the Gaza Strip.
Oil prices fell for the second consecutive day, weighed down by unexpectedly high weekly US oil inventory data. Analysts had expected the seventh consecutive decline. Brent and WTI prices fell by up to 1.5%. The data reignited concerns about demand among market participants.
Gold prices turned negative after approaching a record high of $2,484 per ounce. The precious metal fell 0.7% to $2,447. Support for "safe haven" gold could come from geopolitical tensions in the Middle East.
Mars Acquisition Boosts Kellanova
Nvidia rose another 1.6% after gaining 6.5% the previous day on rate cut speculation. Reports that Huawei is preparing to produce a AI chip had no impact on the stock. Huawei could emerge as a competitor to Nvidia in the Chinese market.
In the semiconductor sector, US chipmaker Intel sold its stake in chip designer Arm Holdings in the second quarter. This was revealed in a filing by the company to the US Securities and Exchange Commission. At the beginning of the year, Intel held around 1.8 million Arm shares, but by the end of the June quarter, it held none. Large investors and companies with significant holdings are required to update their stakes quarterly. Intel's stock fell 2.7%.
Alphabet stock fell 2.3% following a media report that the US Department of Justice is reviewing the company's potential breakup. Alphabet lost an antitrust lawsuit against the US government in early August.
Kellanova's shares surged by 7.8% after the company finalized a deal to sell its entire business to confectionery giant Mars for $35.9 billion. Kellanova, which produces snacks like Pringles and Cheez-It, was spun off from Kellogg in 2023.
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Despite the subdued market reaction to the US inflation data, trading in shares of tech companies like Nvidia remained active. Investors closely watched the company's performance following its Mars acquisition, with its shares experiencing a 1.6% rise.
Given the potential interest rate cut suggestion by the Federal Reserve, trading in shares of companies that could benefit from lower interest rates, such as borrowers, could become more dynamic.
