At the market’s close, Dow Jones Industrial Average-indexed stocks inched into the green, headed for the fourth consecutive day of gains. Whilst the S&P 500 and Nasdaq Composite are down less than 0.5% headed into afternoon trading, the Dow is up 0.33%. Why are Dow stocks up today?
Well, this time around, it seems there’s more than one reason for investors to justify their somewhat cheery demeanor.
Investors are likely still buzzing over the results of the better-than-expected Consumer Price Index (CPI) inflation report released Wednesday. Bolstered by declining vehicle and airline prices, prices rose just 0.2% in June, representing annual inflation of 3%, the lowest level since March 2021. Core CPI, which excludes Food and Energy, increased 0.2% in June, up 4.8% from last year, both better than projections.
The promising nature of the report already has some economists hopeful the Federal Reserve may opt to continue its pause on its rate hike campaign rather than raise rates, a bullish sign for stocks.
“There has been significant progress made on the inflation front, and today’s report confirmed that while most of the country is dealing with hotter temperatures outside, inflation is finally cooling,” said George Mateyo, Key Private Bank’s chief investment officer.“The Fed will embrace this report as validation that their policies are having the desired effect – inflation has fallen while growth has not yet stalled.”
While traders are still pricing in a strong likelihood that the central bank goes forward with yet another 25 basis-point rate hike at its July 25-26 policy meeting, Wednesday’s CPI has offered compelling evidence that this may represent the final rate hike for the foreseeable future as the Fed allows time for the higher lending rates to work through the economy.
Why Are Dow Stocks Up Today?
Inflation isn’t the only reason for today’s, albeit muted, optimism. A number of banks announced better-than-expected Q2 earnings recently. This includes the likes of JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC), each of whom posted earnings and revenue that exceeded Wall Street consensus forecasts. Despite this, only Dow-listed JPM is in the green heading into the afternoon.
Another Dow stock, UnitedHealth (NYSE:UNH) is one of the big winners today, up more than 7% after reporting strong Q2 earnings results, including a higher 2023 earnings guidance. UNH was by and far the biggest winner amongst the Dow 30 as the runners-up for best-performing Dow stocks were Merck & Co (NYSE:MRK) and Coca-Cola (NYSE:KO), both with gains just shy of 1%.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
