PremiumWashington: The S&P 500 and the Dow Jones Industrial Average hit record highs on Wednesday after data showed that growth in inflation appeared to have peaked, while economically sensitive stocks gained on the passing of a large infrastructure bill.
Nine of the 11 major S&P sectors rose in early trading after inflation numbers calmed some fears of early monetary policy tightening by the U.S. Federal Reserve.
U.S. consumer price increases slowed in July but inflation overall remained historically high amid continued supply-chain disruptions and stronger demand for travel-related services as economic activity rebounded.
The consumer price index increased 0.5% last month after climbing 0.9% in June, the Labor Department said on Wednesday.
After the U.S. Senate passed a $1 trillion bipartisan infrastructure package on Tuesday, an additional $3.5 trillion investment plan to fight climate change and poverty is also on the cards, but faces stiff resistance from Republicans.
Equipment manufacturers Caterpillar Inc and Deere & Co, construction materials supplier Vulcan Materials Co and steelmaker Nucor Corp rose between 1% and 3%, adding to sharp gains from the previous session on hopes of reaping gains from infrastructure projects.
The biggest gainers among the major S&P sectors were utilities, materials and industrials .
At 10:07 a.m. ET, the Dow Jones Industrial Average was up 173.06 points, or 0.49%, at 35,437.73, the S&P 500 was up 10.05 points, or 0.23%, at 4,446.80, and the Nasdaq Composite was up 12.95 points, or 0.09%, at 14,801.04.
NortonLifeLock Inc gained 8.5% after the cybersecurity company agreed to buy London-listed rival Avast for up to $8.6 billion.
Coinbase Global Inc rose 5.0% after the cryptocurrency exchange beat market estimates for second-quarter profit, helped by a near 38% jump in trading volumes on a sequential basis.
Virgin Galactic slid 11.1% after Morgan Stanley downgraded the stock to "underweight" from "equal-weight", pointing to prolonged period of no flights.
Advancing issues outnumbered decliners by a 1.52-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.13-to-1 ratio on the Nasdaq.
The S&P index recorded 34 new 52-week highs and no new lows, while the Nasdaq recorded 36 new highs and 55 new lows.
In the 12 months through July, the CPI advanced 5.4%. Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June.
The so-called core CPI rose 4.3% on a year-on-year basis after advancing 4.5% in June. Annual inflation rates have been lifted by the fading out of last spring's weak readings from the CPI calculation but those so-called base effects are leveling off.
Economists polled by Reuters had forecast the overall CPI would rise 0.5% and the core CPI would rise 0.4%.
The swiftness of the economic recovery has caused a mismatch between supply and demand in a few key sectors as businesses try to rebuild their inventories and overcome supply chain hurdles that were caused by the COVID-19 pandemic. Low interest rates and nearly $6 trillion in government relief have also bolstered demand, causing price pressures to build.
A global semiconductor shortage has held back auto production, pushing up prices of used cars and trucks and accounting for an outsized chunk of rising inflation in recent months.
The U.S. Federal Reserve is paying close attention to price pressures as it mulls when to begin to reduce its massive bond holdings and how soon to begin lifting rates from near zero.
Fed Chair Jerome Powell has said the central bank continues to see the current high inflation readings as temporary although he has acknowledged they may persist for longer than policymakers previously expected.
The U.S. vaccination drive, with nearly 170 million Americans immunized against COVID-19, and the arrival of summer with less restrictions compared to last year, have boosted demand for airline travel, hotel and motel accommodation.
The Fed's preferred inflation measure, the core personal consumption expenditures price index, jumped 3.5% in June, the largest gain since December 1991, and some policymakers are increasingly wary of inflation pressures.
Though inflation has likely peaked, it is expected to remain elevated through part of 2022, as prices for many travel-related services are still below pre-pandemic levels.
