Stocks rose Thursday and the S&P 500 set an all-time high as Wall Street shook off data that showed that U.S. consumer prices in May rose more than expected.
The Dow Jones Industrial Average gained 79 points, or 0.23%, to 34,526, the S&P 500 was up 0.5% and the Nasdaq gained 0.71%. Stocks had traded significantly higher earlier in the session.
Consumer prices last month increased at the fastest pace in more than a decade, according to data from the Labor Department. The hotter-than-expected readings could challenge the Federal Reserve’s accommodative stance as the world’s biggest economy continues its recovery from the COVID-19 pandemic.
The consumer price index rose 0.6% from the prior month. Core CPI, which excludes food and energy, rose more than estimates that called for an increase of 0.7%.
Year over year, CPI jumped 5%, the largest annual gain since August 2008. The core measure rose 3.8%, the highest since 1992.
“The hot print on inflation has to be getting the (Federal Reserve’s) attention,” said Cliff Hodge, chief investment officer for Cornerstone Wealth. “We got the highest core CPI reading since 1992.
“It will still likely be chalked up to transitory base effects, but the CPI print alongside recent releases on higher wages will only turn up the volume on taper talk. Now that earnings season has passed, the focus on macro data, especially around jobs and wages with be razor sharp,” Hodge added.
The yield on the benchmark 10-year Treasury bond fell below 1.467% after initial rising following the release of the inflation data.
Traders will be closely examining the inflation data, hoping it will help them determine whether the Federal Reserve might soon begin discussing pulling back on its market-supporting policies.
The Federal Reserve’s policy-setting body, the Federal Open Market Committee, will be meeting next week.
“We don’t expect the Federal Reserve’s narrative to change after Thursday’s inflation data,” said Nancy Davis, portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge Exchange-Traded Fund (IVOL) – Get Report.
“We believe the Federal Reserve is ready to allow inflation to continue to overshoot its 2% target in an effort to achieve maximum employment, which is the Fed’s focus right now,” Davis added.
Jobless claims in the U.S. last week, meanwhile, fell for a sixth straight week.
Boeing (BA) – Get Report rose modestly Thursday on reports that said the planemaker was in advanced talks with United Airlines (UAL) – Get Report to sell more than 100 of its 737 MAX jets to the country’s second-largest carrier.
GameStop (GME) – Get Report posted a narrower-than-expected first-quarter loss and added two former Amazon AMZN executives to key leadership roles, but the stock sank 26% Thursday after the video game retailer unveiled plans to sell another 5 million shares in order to raise further capital.