U.S. Stocks Pull Back Well Off Best Levels But Remain Moderately Higher

Stocks moved sharply higher in early trading on Thursday but have given back ground over the course of the session. The major averages have pulled back well off their highs of the session but remain in positive territory.

After surging by more than 450 points early in the session, the Dow is currently up 158.16 points or 0.5 percent at 35,281.52. The Nasdaq is up 69.95 points or 0.5 percent at 13,791.97 and the S&P 500 is up 18.24 points or 0.4 percent at 4,485.95.

The early rally on Wall Street came after the Labor Department released a report showing the annual rate of consumer price inflation accelerated by slightly less than expected in the month of July.

The report said the annual rate of growth by consumer prices accelerated to 3.2 percent in July from 3.0 percent in June, while economists had expected the pace of price growth to accelerate to 3.3 percent.

The Labor Department also said its consumer price index rose by 0.2 percent on a monthly basis in July, matching the uptick seen in June as well as expectations.

Excluding food and energy prices, core consumer prices also rose by 0.2 percent for the second straight month in July, in line with estimates.

Meanwhile, the annual rate of growth by core consumer prices slowed to 4.7 percent in July from 4.8 percent in June. The rate of growth was expected to be unchanged.

While the data reinforced expectations the Federal Reserve will leave interest rates unchanged next month, economists suggested “sticky” core inflation could leave the door open for the Fed to resume raising rates in November.

“Core inflation stickiness is untangling, but for the Fed to declare victory on inflation, it is imperative that it unwinds at a faster and more decisive pace,” said Quincy Krosby, Chief Global Strategist for LPL Financial.

She added, “The Fed’s dove versus hawk tug-of-war appears now to be predicated on an ‘insurance’ rate hike, which according to the hawks will help keep inflation expectations anchored.

A separate Labor Department report showed first-time claims for U.S. unemployment benefits rose by much more than expected in the week ended August 5th.

The report said initial jobless claims climbed to 248,000, an increase of 21,000 from the previous week’s unrevised level of 227,000. Economists had expected jobless claims to inch up to 230,000.

Sector News

Most of the major sectors have pulled back well off their highs of the session, although significant strength remains visible among networking stocks.

The NYSE Arca Networking Index is up by 2.2 percent, bouncing off its lowest closing level in well over two months.

Within the networking sector, Infinera (INFN) and Viasat (VSAT) are posting standout gains after reporting their quarterly results.

Telecom stocks also continue to see notable strength on the day, driving the NYSE Arca North American Telecom Index up by 1.4 percent to a nearly four-month intraday high.

On the other hand, housing stocks have come under pressure over the course of the session, dragging the Philadelphia Housing Sector Index down by 1.1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index advanced by 0.8 percent, while China’s Shanghai Composite Index rose by 0.3 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index surged by 1.5 percent, the German DAX Index jumped by 0.9 percent and the U.K.’s FTSE 100 Index climbed by 0.4 percent.

In the bond market, treasuries have shown a lack of direction over the course of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 4.013 percent.

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