Stocks opened on Wednesday but changed soon as market participants cheered on bright inflation data and encouraged news on the US-China trade front.
Prior to the opening bell, data from the Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose 0.1% a month in May.
CPI in May is 2.4% higher than the previous year, a slight increase from the 2.3% increase seen in the previous month, in line with economists’ forecasts.
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Core CPI, which excludes volatile food and energy prices and is considered a more accurate gauge of underlying inflation trends, rose 0.1% between April and May, up 2.8% year-on-year. Economists expected Core CPI to increase by 0.3% and 2.9%, respectively.
This is welcome news on Wall Street, but not everyone is still hearing clearly. “DIP below 2.5% of Spring CPI might be as good as inflation this year,” says Bill Adams, Chief Economist at Comerica.
The demand for “wobble” consumers is likely the reason for tamed data, Adams noted, adding that the Fed’s beige book “reports anecdotes of consumers acting in skittish due to fears over the economy.”
As a result, some “companies are likely to get discounts to bring customers to their doors in May,” the economist said.
However, he believes there is a limit to the duration of a company absorbing higher input prices, and expects inflation to recover later in the year.
Trump has declared US-China trade deals “complete”
Sentiment also won a lift after the Trump administration announced a temporary trade deal with China.
High-level negotiations began in London this week, and early today, President Trump posted on his true social platform that deals with China will take place.
The exact terms have not been released yet, but the two countries reportedly are returning to the framework agreed to in Geneva, Switzerland last month.
Additionally, China has agreed to supply US companies with temporary rare earth export licenses. In return, Washington will allow products such as jet engines and ethane to be sold to Beijing.
Steel stocks slide at US Mexican trade lecture
The reports also show that the US and Mexico are approaching a transaction to reduce the 50% tariff Trump imposed on steel imports earlier this month.
According to Bloomberg, the agreement between the two countries can include a quota-type situation in which iron imports remain free of tariffs as long as steel imports from Mexico are below certain levels.
In response, stocks in US-based steelmakers Cleveland Cliff (CLF, -8.1%), Nucor (NUE, -6.1%) and Iron Dynamics (STLD, -2.8%) all fell today.
After earnings, the chewiness drops
Chewy (Chwy) was another notable decline on Wednesday, sinking 11.0% after retailers reported revenue.
The company disclosed adjusted revenue and revenue that exceeded its fiscal first quarter forecasts, but GAAP’s net income (the key revenue periods investors should know) did not reach what Wall Street had expected.
And as Jay Woods, chief global strategist at Freedom Capital Market, wrote in an email earlier this week, consumer discretionary stocks were over-acquired towards revenue, surged 45% since April 7th.
“There’s a good opportunity to adopt this name in its portfolio because the long-term technology looks good and the company is known for its loyal user base,” Woods said.
IBM hits new highs
On the positive side of today’s ledger is the International Business Machine (IBM), jumping 1.9% to mark a new record of $281.64. It was also one of the best Dow Jones stocks on Wednesday.
The increase in Big Blue’s stock was the news that the company was on the pace to build large-scale fault-tolerant quantum computers. According to a June 10th press release, IBM Quantum Starling will be available by 2029.
The news also created HALO, another quantum computing stock. This sees the remarkable benefits today using quantum computing (QUBT, +25.4%) and Rigetti computing (RGTI, +11.4%).
Regarding the main index, the Dow Jones Industrial Average closed fractionally at 42,865, with the S&P 500 at 6,022, 0.3% lower, and the Nasdaq composite at 19,615, down 0.5%.
