Nasdaq Extends Winning Streak But Dow, S&P 500 Give Back Ground

After failing to sustain an early move to the upside, stocks gave back ground over the course of the trading session on Thursday. The major averages pulled back well off their highs of the session, with the Dow and the S&P 500 ending the day in negative territory.

The Dow jumped by nearly 180 points in early trading but ended the day down 168.33 points or 0.5 percent at 34,721.91. The S&P 500 also slipped 7.21 points or 0.2 percent to 4,507.66, while the Nasdaq inched up 15.66 points or 0.1 percent to 14,034.97 closing higher for the fifth straight session.

The early strength on Wall Street partly reflected a positive reaction to a Commerce Department report showing consumer price growth in the U.S. accelerated in line with economist estimates in the month of July.

The Commerce Department said the annual rate of consumer price growth increased to 3.3 percent in July from 3.0 percent in June. The faster growth matched expectations.

The reading on inflation also showed consumer prices rose 0.2 percent on a monthly basis in July, matching the uptick in June as well as economist estimates.

The report also said the annual rate of growth by core consumer prices, which exclude food and energy prices, inched up to 4.2 percent in July from 4.1 percent in June. The modest increase also matched expectations.

Core consumer prices rose by 0.2 percent on a monthly basis in July after edging up by 0.2 percent in June, in line with estimates.

The readings on prices for personal consumption expenditures are said to be the Federal Reserve’s preferred gauges of inflation.

“July PCE inflation was modest for a second straight month, establishing a solid runway for the Fed to leave rates unchanged next month,” said Chris Low and Will Compernolle, FHN Financial Chief Economist and Macro Strategist.

They added, “There is one more CPI report before the September FOMC meeting (coming during the pre-meeting quiet period) that could shift the FOMC’s inflation confidence when setting rate and inflation projections for the year ahead.”

Buying interest waned over the course of the session, however, as traders seemed reluctant to make significant moves ahead of the release of the closely watched monthly jobs report on Friday.

Economists expect employment to increase by 170,000 jobs in August after climbing by 187,000 jobs in July, while the unemployment rate is expected to remain at 3.5 percent.

Sector News

Networking stocks saw substantial strength on the day, driving the NYSE Arca Networking Index up by 3.1 percent to its best closing level in a month.

Ciena (CIEN) led the sector higher, soaring by 15.8 percent after reporting better than expected fiscal third quarter results.

Notable strength was also visible among computer hardware stocks, as reflected by the 1.2 percent gain posted by the NYSE Arca Computer Hardware Index.

On the other hand, transportation stocks came under pressure over the course of the session, dragging the Dow Jones Transportation Average down by 1.3 percent.

Tobacco, healthcare and gold stocks also moved to the downside as the day progressed, weighing on the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan’s Nikkei 225 Index advanced by 0.9 percent, while China’s Shanghai Composite Index fell by 0.6 percent.

The major European markets also turned mixed on the day. While the German DAX Index rose by 0.4 percent, the U.K.’s FTSE 100 Index slid by 0.5 percent and the French CAC 40 Index declined by 0.7 percent.

In the bond market, treasuries moved mostly higher after ending the previous session little changed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 2.5 basis points to 4.093 percent.

Looking Ahead

The monthly jobs report is likely to be in the spotlight on Friday, although a report on manufacturing activity may also attract some attention.

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