Stocks notch hard-fought win after July CPI report.
Stocks notch hard-fought win after July CPI report.
Stocks React to Inflation and Jobs Data
Stocks started off strong on Thursday, buoyed by positive inflation data. However, as the day progressed, concerns about jobs data tempered the initial excitement, leading to a mixed finish for the market. The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) in July rose by 0.2% month-over-month and 3.2% year-over-year. Core CPI, which excludes volatile food and energy prices, increased by 0.2% monthly and 4.7% annually. These figures indicate a slight uptick in inflation compared to the previous month.
Notably, the areas experiencing significant price increases were shelter and food. Meanwhile, the Labor Department revealed that initial jobless claims climbed by 21,000 to 248,000, reaching the highest level since late June. Mike Loewengart, head of model portfolio construction at Morgan Stanley, emphasized that the data reaffirms the Federal Reserve’s stance on taming inflation. While the rise in jobless claims may provide hope for a looser labor market, Loewengart cautioned against relying solely on weekly figures, stating the need for a clear trend in monthly numbers. He also suggested that while the Fed may refrain from cutting interest rates next month, it is unlikely to raise them either.
Following the release of this economic data, market expectations continue to lean towards the Federal Reserve keeping interest rates unchanged during their upcoming September meeting. According to CME Group, futures traders are currently pricing in a 91% probability of no rate hike next month, with no projected increases or decreases for the rest of the year.
Tapestry Acquires Capri in a Retail Merger
In another major development, Tapestry, a luxury retailer, announced its acquisition of Capri Holdings. This news caused Capri’s stock to soar by 55.7%, while Tapestry’s stock slumped by 15.9%. The cash deal, valued at $8.5 billion, equates to $57 per CPRI share, representing a nearly 65% premium to the previous day’s closing price. Irwin Boruchow, an analyst at Wells Fargo, described the deal as transformational for Tapestry, particularly in the handbag market. The addition of Michael Kors, alongside Versace and Jimmy Choo, positions Tapestry as a strong competitor against European luxury stocks.
Disney Boosts the Dow
While the overall market experienced a mixed performance, the Dow Jones Industrial Average outperformed, closing 0.2% higher at 35,176. This was attributed to Walt Disney’s positive earnings report, with the entertainment and media giant’s stock surging by 4.9%. Although Disney exceeded expectations in terms of fiscal third-quarter earnings, revenue fell short. The company also announced price increases for its Disney+ and Hulu streaming services, with the exception of the cheaper ad-supported versions.
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The S&P 500 ended the day with a marginal gain of 0.03% at 4,468, while the Nasdaq Composite edged up by 0.1% to reach 13,737.
These recent developments in the stock market highlight the impact of economic data on investor sentiment and trading activity. While positive inflation figures initially boosted stocks, concerns about jobless claims and potential labor market trends influenced the market’s outcome. Furthermore, the retail merger between Tapestry and Capri Holdings will reshape the luxury handbag space and position Tapestry as a major player. Lastly, Disney’s strong performance contributed to the Dow’s success despite revenue falling short of expectations.
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