Investors digest latest US inflation data

NEW YORK, June 10, (AP): Stocks edged higher Thursday, bringing the S&P 500 index out of the red for the week. Health care and technology companies were among the biggest gainers.

The S&P 500 index was up 0.2% as of 11:10 a.m. Eastern. The Dow Jones Industrial Average was up 79 points, or 0.2%, to 34,5260, and the Nasdaq Composite rose 0.2%. Bond yields were steady.

Stock prices rose, though they lost some momentum by midmorning, after the Labor Department said consumer prices jumped 5% in May, the biggest year-over-year increase since 2008. The figure was higher than the 4.6% rise that economists had expected,

While investors have been concerned about inflation for weeks, the May report seemed to reinforce the growing consensus that any increase in inflation will be temporary. A significant portion of the rise in consumer prices was tied to the sale of used cars, for example, which is largely attributed to the fact that many rental car companies are buying vehicles to beef up their fleets as people return to traveling.

“Keep in mind that as we start to make our way back to a full economic recovery, there is pent up demand and supply constraints from raw material and labor shortages,” said Mike Loewengart, a managing director at E-Trade Financial. “This creates the type of inflation that the Fed believes is transitory, meaning it too shall pass. Whether or not they are correct remains to be seen.”

The bond market was steady after the inflation data, with the yield of the 10-year U.S. Treasury note holding at 1.49%.

Investors also reacted positively to more data that showed continued improvement in the labor market. The number of Americans who filed for unemployment benefits last week fell by 9,000 to 376,000, another pandemic low.

Markets are also watching for developments from a summit of the Group of Seven in Britain. At the top of the leaders’ agenda is helping countries recover from the coronavirus pandemic, which has killed more than 3.7 million people and wrecked economies.

Benchmarks fell in Paris and Frankfurt but rose in Tokyo and Shanghai. U.S. futures were little changed.

“There’s a sense of every man for himself ahead of the U.S. inflation data this evening, a data point that has left markets in limbo and seems to be taking an interminably long time to arrive,” Jeffrey Halley of Oanda said in a report.

Stimulus

The European Central Bank was expected to leave its stimulus efforts running at full steam at a policy setting meeting Thursday even as the economy shows signs of recovery thanks to the easing of pandemic restrictions.

Markets are also watching for developments from a summit of the Group of Seven in Britain. At the top of the leaders’ agenda is helping countries recover from the coronavirus pandemic, which has killed more than 3.7 million people and wrecked economies.

The G-7 leaders are meeting for three days at a British seaside resort. It’s the first such gathering since before the pandemic.

Relations with China are another key concern, as Beijing and Washington remain at odds over trade and technology policies heading into the fourth year of a tariff war.

The Labor Department’s release of the consumer price index comes shortly before a meeting next week of the Federal Reserve’s Open Market Committee, which sets policy on interest rates and other measures.

Germany’s DAX edged 0.1% lower to 15,564.78 while the CAC 40 in Paris lost 0.2% to 6,550.87. In Britain, the FTSE 100 picked up 0.3% to 7,099.18. U.S. futures were little changed, with the contract for the Dow industrials up 0.1% and that for the S&P 500 barely changed.

In Asian trading, Tokyo’s Nikkei 225 rose 0.3% to 28,958.56 and the Kospi in South Korea picked up 0.3% to 3,224.64. In Hong Kong, the Hang Seng shed less than 4 points to 28,738.88, while the Shanghai Composite index advanced 0.5% to 3,610.86. Australia’s S&P/ASX 200 gained 0.4% to 7,302.50.

On Wednesday, a slide in banks and industrial companies nudged stocks on Wall Street to modest losses after an early gain faded in the last half-hour of trading. Stocks championed by hordes of online retail investors, the “meme” stocks as they have become known, were volatile once again.

The S&P 500 slipped 0.2% to 4,219.55. The Dow Jones Industrial Average gave up 0.4% to 34,447.14, while the Nasdaq held up somewhat better, ending down just 0.1% at 13,911.75. The Russell 2000 index gave up 0.7% to 2,327.13.

In other trading, U.S. benchmark crude lost 2 cents to $69.94 per barrel in electronic trading on the New York Mercantile Exchange. It lost 9 cents to $69.96 per barrel on Wednesday.

Brent crude, the international standard, picked up 4 cents to $72.26 per barrel.

The U.S. dollar was trading at 109.47 Japanese yen, down from 109.64 late Wednesday. The euro weakened to $1.2169 from $1.2182.