US stocks rally, nearing record highs after encouraging inflation data calms market volatility
US stocks rallied on Tuesday, nearing last month’s record highs as investors reacted to the first of two key inflation reports, according to CNBC.
The Dow Jones Industrial Average gained 408 points, or 1.04 percent, closing at 39,765.64. The Nasdaq Composite surged by 2.43 percent to 17,187.61, while the S&P 500 rose 1.68 percent, ending the day at 5,434.43. This broad market index is now within 5 percent of its July record.
The rally followed the release of the producer price index (PPI), which measures wholesale prices. The PPI increased by 0.1 percent in July, slightly below economists’ expectations of a 0.2 percent rise, as predicted by Dow Jones consensus estimates.
Investors viewed this data as a positive sign ahead of the more closely watched consumer price index (CPI) report, which is scheduled for release on Wednesday. The CPI is anticipated to show a 0.2 percent month-over-month increase, following a 0.1 percent decline in the previous month.
Analysts believe this data could provide much-needed direction to a market that has experienced significant volatility in recent weeks.
David Russell, global head of market strategy at TradeStation, commented on the situation, stating, “Today’s PPI data gives further evidence that the tide has turned on inflation, especially in services.”
He added that investors who recently sold off stocks in anticipation of lower prices might be disappointed, as “the other shoe isn’t dropping.”
Tuesday’s gains built on the strong momentum from late last week, helping the market recover from the sharp sell-off on August 5. Since that decline, the S&P 500 has risen by 4.2 percent.
Additionally, market volatility has decreased significantly, with the Cboe Volatility Index (VIX) falling below 20 on Tuesday after spiking above 65 last week.
In corporate news, Starbucks shares soared by 24.5 percent after the company announced that Brian Niccol, the current CEO of Chipotle, would be taking over as its next CEO. Meanwhile, Chipotle’s shares dropped by 7.5 percent following the news.
