NEW YORK, Aug 12 ― A global index of stocks fell yesterday while US Treasury yields rose after a July inflation reading showed prices rising slightly faster than expected, fuelling expectations the Federal Reserve will keep interest rates higher for longer.
The US producer price index (PPI) for final demand rose 0.3 per cent in July, according to the Labor Department. This compared with economist expectations for 0.2 per cent. And in the 12 months through July, the PPI rose 0.8 per cent against estimates for 0.7 per cent.
On Thursday, Wall Street's main indexes had finished flat, giving up most early gains on milder-than-feared consumer price inflation data.
But also yesterday a survey showed US consumer sentiment climbing to the highest level in nearly two years in July with calming inflation and a strong labour market boosting consumers.
While he saw the sentiment survey as good news for investors, John Augustine, chief investment officer at Huntington National Bank, said the bond market's reaction to the inflation data was causing a ripple effect in the stock market.
“It's bond yields driving the day. Higher bond yields generally take the Nasdaq down,” he said, noting that investors were focused on the Fed, earnings estimates and the rising price of oil futures.
Yesterday's data suggested to Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute in St. Louis, that the Fed will need to keep rates higher for longer and he said “it puts additional rate hikes back on the table for this year.”
“We think there's some reassessment of inflation going on with investors looking further under the hood. Disinflation has been very rapid in the past months at the top level but that may be levelling out here a little,” Christopher said.
In stocks, the Dow Jones Industrial Average rose 105.25 points, or 0.3 per cent, to 35,281.4. The S&P 500 lost 4.78 points, or 0.11 per cent, to end at 4,464.05 and the Nasdaq Composite dropped 76.18 points, or 0.56 per cent, to finish at 13,644.85 after both hit their lowest levels in a month earlier in the day.
For the week the Dow rose 6.2 per cent. The S&P fell 0.3 per cent and the Nasdaq dropped 1.9 per cent, marking two consecutive weeks of losses for both indexes the first time this year.
MSCI's gauge of stocks across the globe shed 0.54 per cent. for the week the global index was down 0.70 per cent marking its first back-to-back weekly loss since May.
In currencies, the US dollar touched 145.00 against the yen, which was its highest since June 30. The Japanese yen was last down 0.14 per cent versus the greenback at 144.94 per dollar.
The dollar index, which measures the greenback against a basket of major currencies, rose 0.214 per cent, with the euro down 0.32 per cent to US$1.0944 (RM4.99).
Sterling was last trading at US$1.2698, up 0.18 per cent on the day after GDP data showed Britain eked out unexpected growth in the second quarter, helped by a strong June performance.
On the US Treasuries side, benchmark 10-year notes were up 8.4 basis points at 4.166 per cent, from 4.082 per cent late on Thursday. The 30-year bond was last up 3.9 basis points to yield 4.2717 per cent. The 2-year note was last up 7.6 basis points to yield 4.8968 per cent.
In commodities, oil prices rose for their longest weekly gaining streak since a run that ended June 10, 2022, after forecasts for tightening supplies from the International Energy Agency (IEA).
US crude settled up 0.45 per cent at US$83.19 per barrel and Brent ended the session at US$88.81, up 0.47 per cent on the day. ― Reuters