Stock Market Overview – Stocks Rise on Positive Trade Sentiment; CPI Remains Subdued

Yield rebound on strong jobless claims data
David Becker
Stock market data on screen

US stocks were mostly higher on Thursday, as riskier assets gained traction and the VIX volatility index continued to slide. Crude oil prices were on the defensive following Wednesday inventory report. Consumer prices slowed in August reflecting a big drop in gasoline prices. Jobless claims declined this week, dropping to the lowest level since August. The ECB lowered interest rates on Thursday and pledged to begin purchasing assets on November 1.

CPI Edged Higher in August

Consumer prices increased by a slight 0.1%, reflecting a big drop in the cost of gasoline and other energy products. According to the  Labor Department consumer prices edged higher followed a much bigger 0.3% rise in July which had been driven by a jump in energy prices. The overall price increase slowed leaving consumer prices rising a modest 1.7% over the past year. Core inflation, which excludes volatile food and energy costs, rose 0.3% last month and 2.4% over the past year.

Jobless Claims Dropped

Initial jobless claims declined 15,000 to 204,000 for the week ended September 7, the lowest level since April, according to the Labor Department. The drop in claims was the largest since May. Data for the prior week was revised to show 2,000 more applications received than previously reported. Expectations were for claims to slip to 215,00 in the latest week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 4,250 to 212,500 last week.

Crude Inventories Declined

Energy shares moved lower on Thursday despite a larger than expected draw in commercial crude oil inventories which decreased by 6.9 million barrels from the previous week. Gasoline inventories decreased by 0.7 million barrels last week and are about 3% above the five year average for this time of yearDistillate fuel inventories increased by 2.7 million barrels last week and are about 6% below the five year average for this time of year. Total commercial petroleum inventories decreased last week by 3.1 million barrels last week.

The ECB Cut-Rates and is Poised to Begin QE

The ECB cut its key deposit rate and said it would begin purchasing 20 billion euros a month of asset purchases, known as quantitative easing which is scheduled to begin on November 1. The level of asset purchases was lower than some investors had hoped. Mr. Draghi said it was “high time for fiscal policy to take charge,” suggesting that monetary policy alone would not be able to stimulate economic growth and that the EU would need fiscal policy to help generate a better investment environment.

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