On Tuesday, the benchmark equity indexes in the United States experienced significant gains, driven by a report indicating that producer prices rose less than forecasted in July. This development comes as investors eagerly await the official consumer inflation data scheduled for release on Wednesday. The Nasdaq Composite saw a remarkable increase of 2.4%, reaching 17,187.6, while the S&P 500 climbed 1.7% to close at 5,434.4.
Additionally, the Dow Jones Industrial Average gained 1% to settle at 39,765.6. Among the sectors, technology and consumer discretionary emerged as the leading gainers, while energy stood out as the sole decliner. In light of the latest economic developments, the US producer price index (PPI) experienced a month-over-month rise of 0.1% in July, according to the Bureau of Labor Statistics.
This figure is notably lower than the 0.2% gain anticipated by analysts participating in a Bloomberg poll. On an annual basis, the PPI grew by 2.2% last month, also falling short of the expected 2.3% increase. Analysts at Stifel highlighted that, "A cooler-than-expected PPI report offers welcome support for those in favor of a near-term rate reduction." However, they cautioned that the inconsistency observed across the underlying components—especially an uptick in prices excluding food, energy, and trade services—places heightened importance on the upcoming release of the consumer price index (CPI) as a critical indicator of overall price pressures.
For the CPI, a Bloomberg-compiled consensus anticipates an increase of 0.2% on a sequential basis and an annual jump of 3% in July. Moreover, small business optimism in the US saw an upward trend last month, reaching its highest level since February 2022. However, concerns regarding inflation persist as the top worry among business owners, as detailed in the latest survey from the National Federation of Independent Business. TD notes, "Combined with an uptick in inflation concerns, it seems that while overall sentiment is improving, small businesses are remaining cautious for the time being." In the bond market, the two-year yield in the US decreased by 7.5 basis points to 3.94%, while the ten-year rate saw a drop of 6.1 basis points to 3.85% on Tuesday. Atlanta Federal Reserve President Raphael Bostic mentioned that despite recent data strengthening his "confidence" in the ability of policymakers to curb inflation back to the 2% target, he seeks "a little more data" to bolster the case for easing monetary policy, as reported by Reuters. In the commodity markets, West Texas Intermediate crude oil prices fell by 2% to $78.45 per barrel.
The decline in oil prices is attributed to renewed concerns about demand, particularly after the Organization of the Petroleum Exporting Countries (OPEC) revised its demand growth forecast for 2024 downward in light of softened expectations from China, according to insights from D.A. Davidson. In notable company news, Starbucks ($SBUX) has successfully recruited Brian Niccol, the Chief Executive of Chipotle Mexican Grill ($CMG), who will take over as the CEO of the coffee giant next month.
Following this announcement, Starbucks shares surged by nearly 25%, marking it as the top gainer on both the S&P 500 and the Nasdaq. Conversely, Chipotle experienced a decline of 7.5%, registering as the most significant loser on the S&P 500. In another significant transaction, Baxter International ($BAX) has agreed to divest its kidney care segment to the private equity firm Carlyle Group ($CG) in a deal valued at $3.8 billion.
In reaction to this news, Baxter's shares dropped by 6.6%, making it the second worst-performing stock on the S&P 500, while Carlyle’s shares increased by 2.4%. In the precious metals market, gold prices edged up by 0.1% to $2,506.90 per troy ounce, whereas silver saw a slight decline of 0.4%, settling at $27.91 per ounce.
Overall, the day's trading reflects significant movements in financial markets influenced by key economic reports and major corporate announcements that are shaping investor sentiment and market strategies..