Stocks pulled back after an early rally on Thursday, with the Dow ending the day up a modest 52.79 points, or 0.2%. The major averages retreated from their session highs, closing just above the unchanged line. The Nasdaq edged up 0.1%, while the S&P 500 inched up less than a tenth of a percent.
The initial surge in the market was fueled by the release of a report from the Labor Department, which showed that the annual rate of consumer price inflation in July had accelerated slightly less than expected. According to the report, the annual rate of growth in consumer prices rose to 3.2% from 3.0% in June, falling short of economists’ expectations of a 3.3% increase.
The report also revealed a 0.2% monthly increase in the consumer price index for July, matching the uptick seen in June and meeting expectations. Similarly, core consumer prices, which exclude food and energy prices, rose by 0.2% for the second consecutive month, in line with estimates.
Despite the data reinforcing expectations that the Federal Reserve would leave interest rates unchanged next month, economists noted that the persistence of core inflation could potentially leave room for a rate hike in November.
In terms of sector performance, networking and telecom stocks displayed strength, with the NYSE Arca Networking Index climbing by 1.9% and the NYSE Arca North American Telecom Index reaching a three-month closing high. On the other hand, housing stocks experienced pressure, causing the Philadelphia Housing Sector Index to decline by 1.2%. Steel stocks also saw weakness, with the NYSE Arca Steel Index dropping by 1.1%.
In overseas trading, Asian markets mostly traded higher, with Japan’s Nikkei 225 Index up 0.8% and China’s Shanghai Composite Index rising 0.3%. European markets also experienced gains, with the French CAC 40 Index surging by 1.5%, the German DAX Index jumping by 0.9%, and the U.K.’s FTSE 100 Index increasing by 0.4%.
In the bond market, treasuries faced pressure late in the trading day, resulting in the yield on the benchmark ten-year note increasing by 6.8 basis points to 4.080%.
Looking ahead, investors may pay attention to the Labor Department’s report on producer price inflation, as well as the University of Michigan’s preliminary reading on consumer sentiment in August, which includes inflation expectations.
Overall, the stock market saw a pullback from its initial rally, but managed to end the day slightly in positive territory. The report on consumer price inflation provided some reassurance to investors regarding the Federal Reserve’s interest rate decisions, although the persistence of core inflation could still impact future rate hikes.
