Soft inflation, encouraging earnings fuel stock rally | MarketTalk: What’s up today? | Swissquote

Show notes

We are having a great week in terms of US inflation news. After Wednesday’s data showed that the US headline inflation slowed to 3%, and core inflation fell to 4.8% - both lower than what analysts had penciled in, yesterday’s producer price inflation data also came in lower than expected.
As a result, the US yields further dived and the US dollar index slipped below the 100 mark. The S&P500 extended gains yesterday, and closed the session above the 4500 mark for the first time since April 2022, while Nasdaq 100 rallied another 1.73%. Amazon jumped to a 10-month high yesterday after reporting record sales during its Prime Day. Happily, this week’s inflation numbers were sufficiently soothing, so that the record Prime Day sales didn’t boost inflation expectations. MAMAA stocks were up by 1.82%. Crude oil on the other hand rallied past the 200-DMA, near $77pb, and consolidates at around that level this morning.
One good news is that, although the resilience of the US jobs market remains a major concern for the Fed, the stock market rally could be a much smaller concern according to the Fed’s recently launched financial conditions index.
Slow growth is bad for stock valuations, but investors remain focused on earnings, rather than the overall financial conditions, and we have good news on the earnings front so far. Delta Airlines reported record revenue and profit in Q2, and said that they are ‘looking at a very, very strong Q3’, while PepsiCo revealed a strong quarter thanks to higher prices they could ask from customers, and after raising its sales and earnings estimates. Today, some US big banks will go to the earnings confessional.
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