Morning Gains Evaporate On Inflation Level Worries

Morning gains on Wall Street evaporated after benchmark indexes slid in a volatile session.  

Popular indexes opened higher but struggled to hold on to advances as investors lacked enthusiasm and the Fed officials reiterated that the fight against inflation is far from over. 

The Producer Prices index, a measure of wholesale prices, declined 0.5% on an adjusted basis in July after rising at 1.0% in June and 0.8% in May, the U.S. Bureau of Labor Statistics reported Thursday. 

On an unadjusted basis, the measure of wholesale prices rose 9.8% from a year ago. 

The core index, excluding food, energy and services, rose at a slower pace of 0.2% after rising at 0.3% in June. On a yearly basis, the core index rose 5.8%. 

The surprise decline in wholesale prices followed the slight cooling of consumer prices to 8.5% reported on Wednesday.

The back-to-back two inflation reports lifted the hopes that the Federal Reserve may moderate the rate hikes at the next meeting in late September.  

However, Fed officials reiterated the Fed’s commitment in lowering inflation to its target rate of 2%. 

“There’s good news on the month-to-month data that consumers and businesses are getting some relief, but inflation remains far too high and not near our price stability goal,” said Federal Reserve official Mary Daly to Financial Times. 

The report also noted 50 basis points is Daly’s “baseline” expectation for the rate hike at the next Fed’s meeting.   

The yield on 10-year U.S. Treasury notes increased to 2.89% and 2-year notes rose to 3.23%, after the release of the data as investors focused on the rise in prices on an annual basis. 

 

Weekly Jobless Claims Rise 

Weekly initial jobless claims rose 14,000 to 262,000 for the week ending on August 6 from the previous week’s downwardly revised level of 248,000, the Department of Labor said Thursday. 

 

Gasoline Prices Fall Below $4 a Gallon 

The average price of a gallon of gasoline declined to $3.99 on Thursday, the Automobile Association of America reported. 

The average price peaked at $5.02 per gallon in June and the national average has not fallen below $4 a gallon since March 5. 

Futures of crude oil prices rose $2.75 to $94.68 a barrel and natural gas rose 30 cents to $8.61 a thermal unit.  

Oil complex stocks gained between 2% and 6% after the crude oil prices rebounded more than 3%. 

Movers: Disney, Six Flags, Sonos 

The S&P 500 index increased 0.3% to 4,227.53 and the Nasdaq Composite index was nearly unchanged at 12,848.13. 

Tech stocks led the gainers for the second day in a row. 

Apple, Amazon, Meta, Alphabet, and Meta traded in the positive. 

Six Flags Entertainment Corp plunged 22% to $20.31 after the operator of the amusement park said attendance in the quarter dropped 22% to 6.7 million from 8.5 million a year ago.  

Second quarter revenues declined 5% to $435 million from $460 million a year ago. Net income in the period plunged 36% to $45 million from $71 million a year ago. 

Total guest spending per person increased 23% to $63.87 from $51.94 a year ago. 

Walt Disney Company increased 5.7% to $118.95 after the media and theme park operator reported better-than-expected revenues and earnings on the stronger attendance at parks. 

Disney said revenues in the fiscal third quarter ending on July 2 rose 26% to $21.5 billion from $17 billion a year ago. 

Net income in the quarter rose 53% to $1.41 billion or 77 cents a diluted share from $923 million or 50 cents a diluted share.

The average monthly revenue per paid subscriber for domestic Disney+ decreased from $6.62 to $6.27 due to a higher mix of subscribers to multi-product offerings, partially offset by an increase in retail pricing.

Free cash flow in the quarter declined to $187 million from $528 million a year ago on higher capital expenditures in parks and resorts. 

Sonos Inc declined 25% to $17.06 after the maker of high-end speakers said revenues in the fiscal third quarter ending on July 2 edged down 2% to $371 million. 

In the period, the company swung to a loss of $0.5 million from a profit of $17.8 million a year ago. 

The company lowered its fiscal year 2022 revenue outlook to a new range between $1.730 billion and $1.755 billion, representing growth of 1% to 2% from fiscal 2021, or growth of 4% to 5% on a constant currency basis. 

This compares to a prior outlook range between $1.95 billion and $2.0 billion, which represented growth of 14% to 16% from fiscal year 2021.

 

European Markets Sink In Volatile Trading

European markets traded higher and investors digested a mixed bag of corporate earnings and German bond yields rose. 

In regional economic news investors reviewed the jobless rate in Sweden, Turkey’s current account balance, and the home price direction in the U.K.  

 Sweden’s unemployment rate in July edged up to 6.7% from 6.6% in June, according to the data released by the Swedish government agency Public Employment Service. 

The jobless rate was the highest since the 6.81% rate in April. 

Turkey’s current account deficit in June narrowed to $3.45 billion from $6.57 billion, largely on the account of improvement in service surplus. 

Merchandise goods deficit decreased to $6.426 billion in June from $8.878 billion in May and in travel services registered a net inflow of $2.728 billion in June.

Home prices in the U.K. continued to advance in July, the Residential Market Survey from the Royal Institution of Chartered Surveyors showed Thursday.

A net 63 percent of respondents said home prices are rising in July, lower than 78 percent in April but still significantly above the long term average of 13 percent. 

Lack of new home supply is driving the U.K.’s home price surge. 

The DAX index increased 0.1% to 13,716.14, the CAC-40 index increased 0.2% to 6,536.79, and the FTSE 100 index fell 0.6% to 7,462.56. 

Deutsche Telekom AG increased 0.2% to 18.89 euros after the company reported a weaker profit in the second quarter but lifted the 2022 earnings outlook. 

Siemens AG dropped as much as 1.5% before recovering to 0.7% rise to 110.06 euros after the industrial company reported second quarter loss, first loss in 12 years. 

Siemens swung to a quarterly loss on the account of expenses of business closure in Russia and investment in Siemens Energy.

Aegon NV soared 9.2% to 4.86 euros after the Dutch financial services company reported second quarter net revenues declined 4% to 538 million euros from 562 million euros a year ago. 

Aegon swung to a quarterly loss of 365 million from a profit of 842 million a year ago on one-time non-operating expenses. 

The quarterly  result was impacted by a one-time charge related to reinsurance rate increases in the US, contributing to the net loss of 348 million euros. 

Aegon raised its 2022 guidance for operating income from 1.2 billion euros to 1.4 billion euros and expects to achieve cumulative free cash flow over the period 2021 to 2023 of at least 2.2 billion euros, ahead of the 1.4 to 1.6 billion euros target set at the 2020 Capital Markets Day.

 

Asian Markets Rise On Hopes of Continued Easing of Inflation 

Stocks in Asia advanced on the rising hopes that the future U.S. rate hikes will be moderate after the U.S. inflation cooled in July. 

Inflation around the world is easing after crude oil prices continued to fall and extended the six-month loss to 29% from the peak of $121.30 a barrel on March 8. 

Benchmark indexes opened sharply higher after the U.S. consumer price index eased in July to 8.5% from a year ago but still stayed near the four-decade high.  

On a monthly basis, prices were flat. 

U.S. petrol prices at retail locations have declined for 57 days in a row from the peak of $5.23 to $4.14 a gallon. 

Moreover, German consumer price growth eased in July to 7.5% from 7.6% in June and matched the preliminary estimates, according to the Federal Statistical Office data on Wednesday. Consumer prices increased 7.9% in May. 

Markets in Japan were closed today to celebrate the Mountain Day. 

The popular indexes in India traded in a tight range in the session as buyers added positions in tech, consumer products, and financial stocks. 

The Sensex index closed up 515.31 points, or 0.88% to 59,332.60 and the Nifty index closed up 124.25 or 0.7% to 17,659. 

The rupee advanced to 79.21 against the U.S. dollar following the easing of worries of larger U.S. interest rate hikes at the next policy meeting in about five weeks. 

The Shanghai Composite Index rallied 1.6 percent to 3,281.67, while Hong Kong’s Hang Seng Index spiked 2.4 percent to 20,082.43.

Longfor Group Holdings jumped 5.7% to HK$22.10 after the real estate company denied rumors that it missed its latest payment for commercial paper. 

Real estate companies have been under a close scrutiny after mortgage boycotts have spread to several smaller cities on mainland China. 

The Kospi index in Seoul, Korea jumped 1.7% to close at 2,523.78 following the advances in Asian markets. 

LG Chem, LG Energy Solution, and Samsung Electronics advanced between 1% and 3%. 

The ASX 200 Index advanced 1.1% to 7,071 and the broader All Ordinaries Index ended 1.2% higher at 7,325.40.

Resource stocks led the gainers with BHP Billiton, Santos, Fortescue, and Rio Tinto increased between 1% and 3%. 

 

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