Eurozone Inflation Accelerates Year-Over-Year; Updated GDPNow Estimate Falls
Last Updated 4:15PM EST
Stocks finished Thursday’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 gained 0.06%, 0.23%, and 0.26%, respectively.
On Thursday, Eurostat released its finalized report for Eurozone inflation. The Eurozone Consumer Price Index (CPI), which measures the change in the price of goods and services from a consumer’s perspective, came in as expected, at 8.9% on a year-over-year basis. This marks yet another acceleration in the Eurozone inflation rate, which was 8.6% last month. Indeed, the CPI growth rate has been increasing consistently since February 2021.
In addition, when looking at core CPI, which strips out the volatile energy and food prices, inflation rose by 4% year-over-year. This was also an increase from the previous reading of 3.7%.
Nevertheless, there are some positive signs that inflation might be easing. On a month-over-month basis, CPI only increased by 0.1%, significantly lower than the previous 0.8%. Furthermore, month-over-month core CPI actually fell by -0.2%. It’ll be interesting to see if this is the start of a downward trend.
Shifting focus back to North America, The Atlanta Federal Reserve recently updated its GDPNow reading, which allows it to estimate GDP growth in real-time. Currently, it estimates that the economy will see an annualized expansion of 1.62% in the third quarter after experiencing two consecutive quarters of decline.
However, it’s worth mentioning that this is down from last week’s estimate of 2.45% and Tuesday’s estimate of 1.81%. The “nowcast” becomes more accurate as more economic data is released throughout the quarter. Therefore, it will be interesting to see if the estimate continues to fall, going forward. In the previous quarter, the estimate started off positive and eventually ended up correctly estimating a GDP decline by the end of Q2.
Because of this, investors should invest carefully, as we are not in the clear just yet.
Initial Jobless Claims Come in Lower than Expected
Last Updated 3:00PM EST
Stock indices are mixed, heading into the final hour of today’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average is down 0.1%, while the S&P 500 and the Nasdaq 100 are up 0.2% and 0.3%, respectively.
On Thursday, the Department of Labor released its Initial Jobless Claims report, which came in better than expected. In the past week, 250,000 people filed for unemployment insurance for the first time. Expectations were for 265,000 individuals.
When using the four-week average, initial jobless claims were 246,750, down from last week’s reading of 249,500. It’s worth noting that this figure has been in an overall uptrend since the start of April 2022.
In addition, Continuing Jobless Claims, which measures the number of unemployed people who qualify for unemployment insurance, came in at 1.437 million, better than the forecast of 1.438 million but higher than last week’s 1.430 million.
Continuing Jobless Claims are currently sitting near their lowest levels since 1970. Relatively speaking, this suggests that individuals aren’t struggling to find other jobs after being laid off.
However, this figure has been trending upward since the beginning of June. It will be interesting to see if this trend continues as interest rates rise while economic growth continues to slow down.
U.S. Home Sales Decline for the Sixth Straight Month
Last Updated 12:00PM EST
Stock indices are mixed halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average is down 0.1%. Meanwhile, the S&P 500 and the Nasdaq 100 are up 0.2% and 0.5%, respectively.
The healthcare sector (XLV) is the laggard so far, as it is down 0.5%, while the best performing sector, energy, is up 2.2%.
On Wednesday, the National Association of Realtors released its U.S. Existing Home Sales report, which measures the change in sales of existing residential buildings during the previous month on an annualized basis. Existing home sales came in at 4.81 million for the month of July, below the expected 4.89 million.
Nevertheless, this figure was the lowest reading since June 2020, as existing home sales declined month-over-month in July by 5.9%, accelerating from the 5.5% decline in June. Indeed, this represents the sixth straight month of declines, as higher interest rates continue to make homeownership difficult. On a year-over-year basis, sales fell 19.8%.
It is likely that this downward trend will continue as the Federal Reserve continues to hike interest rates to combat inflation.
Stocks are in the Red to Start Thursday’s Trading Session
Last Updated 10:00AM EST
Stock indices are in the red 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.2%, 0.1%, and 0.2%, respectively.
The communications sector (XLC) is the laggard so far, as it is down 0.9%. Conversely, the energy sector (XLE) is the session’s leader, with a gain of 2.3%.
Kohl’s stock (KSS) was down nearly 9% at market open after its earnings report. Kohl’s slashed its earnings forecast by more than half as inflationary pressures and slowing consumer demand are impacting margins.
KSS’ report adds uncertainty to the retail sector after an earnings season that has seen mixed results from various retailers. Nevertheless, the stock cut its losses in half as of this writing.
In addition, WTI crude oil is up more than 3%, hovering around $90 per barrel. This comes after a larger-than-expected drop in U.S. crude oil stockpiles, which fell by 7 million barrels. The expected drop was 275,000 barrels.
Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 2.85%. This represents a decrease of five basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 3.22%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, currently sitting at -37 basis points.
Pre-Market Update
U.S. stock market futures climbed early Thursday morning after the Federal Reserve reiterated its commitment to continue increasing interest rates to reduce inflation.
Futures on the Dow Jones Industrial Average (DJIA) gained 0.15%, while those on the S&P 500 (SPX) inched 0.19% higher as of 6.13 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures climbed 0.18%.
What Happened in the Stock Market on Wednesday
The Dow slid 0.5% through Wednesday’s regular trading session, breaking its five-day-long gains. The S&P 500 and the Nasdaq also recorded losses of 0.72% and 1.21%, respectively, at the closing bell.
The market was abuzz on Wednesday after the Fed said it intends to keep hiking its interest rates until the inflation comes down to around 2%. Recall that the inflation rate, according to July’s consumer price index, was 8.5%, a far cry from the Fed’s target rate. This means there is still a long way to go before the Fed puts an end to its policy tightening campaign.
However, the Fed also said that the pace of its policy tightening every cycle would depend on the concurrent market conditions. However, investors who were expecting a slight easing of the Fed’s stance considering the cooler inflation in July were not convinced. The market still expects a 75 basis point hike in the September round.
Moreover, Target’s (TGT) earnings miss and Lowe’s (LOW) mixed quarterly earnings added to the worries of investors, who are now anxiously waiting for more retail earnings this week.
More Economic Data Await
Later on Thursday, July’s existing home sales data will be released by the National Association of Realtors amid a cooling housing market.
The high mortgage rates have made home purchases unattainable. Moreover, high prices and cost of building had led to a decline in new house construction in July. Sellers have reduced prices in many areas, but the prices are still significantly above last year’s price levels.
Additionally, last week’s jobless claims will also be released on Thursday. Recall, for the week ending August 5, the weekly jobless claims of 262,000 had continued its climb to reach the highest point this year thus far.
