Stocks climb as July PPI stokes Fed speculation

Stocks rose and bond yields fell after the latest US inflation data reinforced speculation the Federal Reserve will be able to deploy its widely anticipated interest-rate cut in September.

Equities pushed higher in early New York trading, with Nvidia Corp. leading gains in megacaps. Starbucks Corp. surged 13% after appointing a new chief. Home Depot Inc. fell after lowering its forecast of a key sales metric for the year on expectations that consumers will continue to hold back spending.

The producer price index for final demand increased 0.1% from a month earlier, according to a Bureau of Labor Statistics report. The median forecast in a Bloomberg survey of economists called for a 0.2% gain. Compared with a year ago, the PPI rose 2.2%. Excluding the volatile food and energy categories it was unchanged in July from the prior month, the tamest reading in four months.

The recent easing of price pressures has bolstered Fed officials’ confidence that they can start to lower borrowing costs while refocusing their attention on the labor market, which is showing greater signs of slowing.

S&P 500 futures rose 0.6%. Treasury 10-year yields declined three basis points to 3.88%. Oil declined, with a likely escalation in the Middle East conflict offset by the International Energy Agency expecting a surplus if OPEC+ adds barrels as planned in the next quarter.

US technology stocks are under “significant pressure” as investor positioning remains extended on the bullish side despite the past month’s selloff, according to Citigroup Inc. strategists. 

The team led by Chris Montagu said there’s still about $22.5 billion worth of long positions on futures tracking the tech-heavy Nasdaq 100 Index.

Corporate Highlights:

• Starbucks Corp. has named Chipotle Chief Executive Brian Niccol as the coffee chain’s new chief executive officer and chairman, replacing Laxman Narasimhan after just over a year in the role.
• Baxter International Inc. said it will sell its kidney-care unit to the Carlyle Group private equity firm for $3.8 billion, part of the health care company’s efforts to streamline and pay down debt.
• Avon Products Inc., owner of the beauty brand known for its door-to-door saleswomen, filed for bankruptcy after facing a wave of lawsuits alleging talc in its products caused cancer.
• Cargill Inc. took a revenue hit of almost 10% in its most-recent fiscal year, a blow to the world’s biggest crop trader after two straight years of records sales.
• General Motors Co. has been laying off staff in China and will soon meet with local partner SAIC to plan a larger structural overhaul of its operations there, a recognition the Detroit automaker is unlikely to see its sales return to 2017 peak levels.
• Paysafe Ltd., an integrated payments platform, boosted its revenue forecast for the full year.
• Sea Ltd. raised the outlook for its main online retailing arm, signaling the Southeast Asia e-commerce leader is effectively encountering intense competition from the likes of TikTok and Lazada.

Key events this week:

• Eurozone GDP, industrial production, Wednesday
• US CPI, Wednesday
• China home prices, retail sales, industrial production, Thursday
• US initial jobless claims, retail sales, industrial production, Thursday
• Fed’s Alberto Musalem and Patrick Harker speak, Thursday
• US housing starts, University of Michigan consumer sentiment, Friday
• Fed’s Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.6% as of 8:31 a.m. New York time
• Nasdaq 100 futures rose 0.8%
• Futures on the Dow Jones Industrial Average rose 0.3%
• The Stoxx Europe 600 rose 0.1%
• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was little changed at $1.0937
• The British pound rose 0.2% to $1.2790
• The Japanese yen was little changed at 147.22 per dollar

Cryptocurrencies

• Bitcoin rose 0.4% to $59,070.41
• Ether fell 0.9% to $2,656.65

Bonds

• The yield on 10-year Treasuries declined three basis points to 3.88%
• Germany’s 10-year yield declined three basis points to 2.19%
• Britain’s 10-year yield declined two basis points to 3.90%

Commodities

• West Texas Intermediate crude fell 0.2% to $79.88 a barrel
• Spot gold fell 0.2% to $2,468.69 an ounce