Economy-linked stocks boost Dow to new highs as inflation growth slows

(Reuters) – The Dow Jones Industrial Average hit a record high on Wednesday, buoyed by data showing that growth in inflation appeared to have peaked, while economically sensitive stocks gained on the passing of a large infrastructure bill.

FILE PHOTO: A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 5, 2021. REUTERS/Andrew Kelly

Six of the 11 major S&P sectors rose after the Labor Department said the consumer price index increased 0.5% last month after climbing 0.9% in June, calming some fears of early monetary policy tightening by the U.S. Federal Reserve.

Inflation has dictated market moves in the past few months, with investors fearing higher price pressures could force the Fed to pare back its ultra-loose accommodative stance sooner than expected.

“One of the few fears that investors seem to have is that interest rates will rise very quickly and maybe the only trigger for that is very high inflation numbers,” said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

“That number didn’t come out as high as people feared, and they decided that it takes away one more risk to the market of rapidly escalating interest rates, at least for now.”

After the U.S. Senate passed a $1 trillion bipartisan infrastructure package on Tuesday, an additional $3.5 trillion investment plan to fight climate change and poverty is now on the cards, but faces stiff resistance from Republicans.

Equipment makers Caterpillar Inc and Deere & Co, construction materials supplier Vulcan Materials Co and steelmaker Nucor Corp rose between 2.1% and 2.7%, adding to sharp gains from the previous session on hopes of benefiting from infrastructure projects.

The biggest gainers among the major S&P sectors were utilities, materials and industrials.

Financial and consumer staples shares also scaled new peaks.

At 12:15 p.m. ET, the Dow Jones Industrial Average was up 179.83 points, or 0.51%, at 35,444.50.

The S&P 500 was up 3.25 points, or 0.07%, at 4,440.00 after hitting an intraday record high earlier in the session.

The Nasdaq Composite was down 65.40 points, or 0.44%, at 14,722.69, dragged down by Moderna Inc and heavyweight tech-heavy growth names Applied Materials Inc, Facebook Inc, Nvidia Corp and Amazon.com.

Technology stocks were pressured by ten-year Treasury yields, which climbed for the sixth straight session amid optimism about a stronger economic reopening. [US/]

Rate-sensitive banking stocks were up 1.4%.

NortonLifeLock Inc gained 8.5% after the cybersecurity company agreed to buy London-listed rival Avast for up to $8.6 billion.

Coinbase Global Inc rose 5.4% after the cryptocurrency exchange beat market estimates for second-quarter profit, helped by a near 38% jump in trading volumes on a sequential basis.

Virgin Galactic slid 14% after Morgan Stanley downgraded the stock to “underweight” from “equal-weight”, pointing to a prolonged period of no flights.

Advancing issues outnumbered decliners by a 1.36-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.52-to-1 ratio on the Nasdaq.

The S&P index recorded 45 new 52-week highs and no new low, while the Nasdaq recorded 60 new highs and 92 new lows.

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