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David Becker

 

US stocks moved higher on Wednesday as the Nasdaq rebounded sharply and the S&P 500 closed just shy of an all-time high. The large-cap index has now rebounded 50% since hitting a low in March. Most sectors in the S&P 500 index were higher led by gains in Utilities and Consumer Staples. Financials, bucked the trend. The US 10-year yield continued to edge higher while the dollar resumed its downtrend. Oil prices rallied following a larger than anticipated draw in crude oil inventories and a drop in US production by 300-thousand barrels per week. The US consumer price index jumped by 0.6% matching the June rise. TSA traffic jumped to 700-thousand this week, up from approximately 200-thousand in April, but still down nearly 75% year over year. The VIX volatility index declined below 22, matching the lowest close in the volatility index since February.

Crude Inventories Draw More than Expected

US crude oil inventories decreased by 4.5 million barrels from the previous week. This compared to the expectation that they would decline by 1-million barrels. At 514.1 million barrels, crude oil inventories are about 15% above the five year average for this time of year. Gasoline inventories decreased by 0.7 million barrels last week and are about 8% above the five year average for this time of year. Total commercial petroleum inventories decreased last week by 6.2 million barrels.

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The Consumer Price Index Rose More than Expected

The US consumer price index rose by 0.6% rise in June, matching the increase seen in May. The uptick was about twice what economists expected. The increase was drive by a rise in gasoline prices. Gasoline prices rose 5.3% from June to July but are down 20.3% on a year over year basis. Food prices dipped 0.4%, the first drop since April 2019. Grocery prices dropped 1.1% while the cost of dining out rose 0.5%. Excluding volatile food and energy prices, CPI surged 0.6% last month from June, which was the biggest monthly increase since January 1991. Still, core inflation is only up 1.6% from a year earlier.

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