In today's trading session, US equity indices and government bond yields exhibited a mixed performance in choppy conditions as market participants weighed the latest inflation statistics alongside the upcoming Federal Reserve policy meeting scheduled for next month. The Nasdaq Composite experienced a slight decline of 0.2%, closing at 17,158.8, while the S&P 500 managed to gain 0.2%, reaching 5,446.2.
The Dow Jones Industrial Average saw a notable increase of 0.6%, closing at 40,013.2. Sector performance was diverse, with financials and energy leading the gainers, while communication services found themselves at the bottom of the spectrum. The latest consumer price index (CPI), adjusted for seasonality, rose 0.2% in July, aligning with the expectations outlined in a survey conducted by Bloomberg, following a modest 0.1% decline in June, as reported by the Bureau of Labor Statistics.
Core CPI, which excludes volatile food and energy prices, also increased by 0.2%, consistent with forecasts and a slight gain of 0.1% in the prior month. Year-over-year, both the overall and core CPI demonstrated a deceleration, landing at 2.9% and 3.2%, respectively, compared to 3% and 3.3% in the previous month.
Bloomberg's average estimates stood at 3% for overall CPI and 3.2% for core CPI. Analyst Ali Jaffery from CIBC commented on the data, "Overall, the Fed will walk away from today's release with more confidence that underlying inflation is headed in the right direction. However, concerns are emerging regarding the labor market showing signs of strain, which may prompt the Fed to act more swiftly than previously indicated in their June Summary of Economic Projections (SEP)." CIBC has projected three consecutive quarter-point interest-rate cuts for the remainder of the year, suggesting a more dovish stance despite the current inflation situation. Meanwhile, data from the CME Group's FedWatch Tool indicated a 44% probability for a 50 basis point rate cut during the Federal Reserve's monetary policy meeting on September 18, while the likelihood of a more modest 25 basis point reduction is at 56%. Despite the recent data, a 25 basis point cut is still anticipated, but Jefferies US economist Thomas Simons noted that "the firmer-than-expected shelter measures serve as a reminder that the Fed should proceed cautiously in this easing cycle." The trajectory of interest rate cuts appears likely to be slow and measured, raising concerns that such a pace may not align with investors' expectations for a swift return to neutral monetary policy or a more accommodative stance, as highlighted in a note from Stifel. In the bond market, Treasury yields were mixed; the 10-year yield dropped by 2.6 basis points to 3.83%, while the two-year yield climbed up by 1.6 basis points to 3.96%.
Furthermore, West Texas Intermediate crude oil prices fell by 0.9%, settling at $77.62 per barrel. In corporate news today, Kellanova has reached an agreement to be acquired by Mars for a significant sum of $35.9 billion in cash, which includes assumed net leverage. Mars, known for its popular brands such as M&Ms and Skittles, will offer $83.50 per share for Kellanova, which is recognized for its Pringles and Cheez-It snacks.
This news led to a notable surge in Kellanova's shares, which jumped 7.7%, marking the largest gain within the S&P 500. Gold prices experienced a decline of 1%, settling at $2,481.71 per ounce, while silver prices decreased by 1.5%, ending at $27.36 per ounce..