By Isabel Wang and Joseph Adinolfi
U.S. stocks ended mostly lower on Thursday, despite hitting a three-month high early in the session after another batch of July inflation data suggested that surging price gains may be easing.
The Nasdaq Composite shed 0.6%, a day after it officially exited a bear market.
How stocks performed
S&P 500 /zigman2/quotes/210599714/realtime SPX +1.97% declined 2.97 points, or 0.1%, to close at 4,207.27.
Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.88% rose 27.16 points, or 0.1%, to finish at 33,336.67.
Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +2.05% lost 74.89 points, or 0.6%, to end at 12,779.91.
On Wednesday, the Dow Jones Industrial Average rose 535 points , or 1.6%, the S&P 500 increased 2.1%, and the Nasdaq Composite gained 2.9%.
What drove markets
Stocks slumped into the closing bell, despite an early morning surge to their highest levels since early May, after the July producer-price index fell 0.5%, compared with expectations for a 0.2% rise.
Thursday’s optimistic inflation report followed a similarly cooler-than-expected reading on U.S. consumer-price growth released a day earlier. That data also helped send stocks soaring, with the Nasdaq exiting bear-market territory and the Dow exiting correction territory.
Hopes that inflation has peaked helped encourage investors to pile back into equities based on the view that slowing inflation could allow the Federal Reserve to hike interest rates less aggressively.
“While one number certainly doesn’t constitute a trend, the decline in wholesale prices could indicate that supply-chain bottlenecks are improving,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “Overall, the data, combined with CPI data earlier this week, is a welcome sign that we could be getting close to or have passed peak inflation. However, we would caution that while the trend is improving, we have a long way to go to get back towards 2% inflation.”
However, some market analysts are urging caution as rising housing costs could keep core inflation elevated, even as a drop in oil prices and other commodities has helped to reduce inflation expectations.
“Our view is that this is a rally that really deserves a lot of scrutiny because when we think about what has happened since the mid-June low, the market outlook hasn’t really changed,” said Jake Jolly, senior investment strategist at BNY Mellon Investment Management.
“Historically, the Fed delivers more hikes than the market anticipates. And this is clearly a hiking cycle that is far from over,” Jolly said.