Good news is bad news for the Dow. But bad news is also bad news, at least when it comes to inflation. Following along?
The Dow slid more than 200 points, or 0.5%, in Thursday morning trading. The S&P 500 was up 0.2% after Nvidia earnings lifted AI-linked stocks. The Nasdaq Composite was up 0.7%.
The Dow dipped after initial jobless claims came in lower than expected. That’s good news for the economy, but bad news for those hoping the labor market would show more signs of cooling to give more leeway for the Federal Reserve to cut interest rates.
Things got worse for the Dow after the S&P Global Flash U.S. Manufacturing Purchasing Managers Index rose to 50.9 in May from 50 in April, ahead of expectations at 50.1.
“The US economic upturn has accelerated again after two months of slower growth, with the early PMI data signaling the fastest expansion for just over two years in May,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in the news release. “The data put the US economy back on course for another solid GDP gain in the second quarter.”
That’s great news! Except if you’re worried about interest rates. Bond yields spiked and stocks slid on the report. There was also bad news on inflation. Companies are cautious about the future path of inflation and interest rates, Williamson added.
“Selling price inflation has meanwhile ticked higher and continues to signal modestly above-target inflation,” he says. “What’s interesting is that the main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive.”
The S&P 500 was resilient to this hit, but only because of Nvidia’s blowout earnings. The top stocks in the index were almost exclusively chip and AI-linked names. Information technology was the only sector that was rising.
Source: finance.yahoo.com