CI Cigna Group

By Chris Matthews and William Watts, MarketWatch

U.S. consumer prices edge up in June, but inflation still muted

U.S. stocks advanced at the start of trade Thursday, attempting to build on gains that saw the Nasdaq Composite index end in record territory after Federal Reserve Chairman Jerome Powell reinforced expectations for an interest rate cut later this month.

Powell, who testified Wednesday before the House Financial Services Committee, will appear before the Senate Banking Committee on Thursday.

What are major benchmarks doing?

The Dow Jones Industrial Average rose 74 points, or 0.2%, to 26,927, while the S&P 500 index was 5 points higher at 2,998, a gain of 0.2%. The Nasdaq Composite index rose 11 points, or 0.1%, to 8,214.

On Wednesday (http://www.marketwatch.com/story/stock-futures-point-slightly-lower-ahead-of-testimony-by-feds-powell-2019-07-10), the Nasdaq gained 60.80 points, or 0.8%, closing out the session at a record 8,202.53. The Dow added 76.71 points, or 0.3%, to finish at 26,860.20, while the S&P closed 13.44 points higher, up 0.5%, at 2,993.07.

The S&P 500 opened above its July 3 closing high of 2,995.82. The Dow remains within striking distance of its July 3 record of 26,966.

Read:S&P 500 index tops 3,000 for first time -- here's how the stock market got here and what it means (http://www.marketwatch.com/story/sp-500-index-tops-3000-for-first-time-heres-what-it-means-and-how-the-stock-market-got-here-2019-07-10)

What's driving the market?

Investors cheered remarks Wednesday by Powell, who told House lawmakers that uncertainty around trade policy tensions and the global economic outlook (http://www.marketwatch.com/story/powell-says-uncertainties-continue-to-weigh-on-us-economic-outlook-and-fed-stands-ready-to-act-2019-07-10), has continued since the Fed's June policy meeting, while citing persistently low inflation as a key reason to consider easing policy. Powell's testimony was seen affirming expectations the central bank will move to cut interest rates when policy makers meet at the end of the month.

"Markets were in buoyant mood on Thursday as Fed Chairman Jerome Powell gave his strongest indication yet that the Federal Reserve will slash interest rates at the July 30-31 meeting," said Raffi Boyadjian, senior investment analyst at XM, in a note.

Rex Nutting:Trump and the stock market are spooking Powell into making this rookie mistake (http://www.marketwatch.com/story/trump-and-the-stock-market-are-spooking-powell-into-making-this-rookie-mistake-2019-07-10)

Powell's remarks were followed by minutes of the Fed's June policy meeting which showed that "many" officials had expressed support for a future interest-rate cut if concerns about the economic outlook continued.

An important reading of consumer price inflation (http://www.marketwatch.com/story/consumer-inflation-edges-up-01-in-june-cpi-shows-but-price-pressures-still-muted-2019-07-11) rose (http://www.marketwatch.com/story/consumer-inflation-edges-up-01-in-june-cpi-shows-but-price-pressures-still-muted-2019-07-11) 0.1% in May, versus a 0.2% rise expected by economists polled by MarketWatch, with core CPI, which strips out volatile food and energy prices, rising 0.3%, above the consensus expectations of 0.2%, and the fastest monthly gain since January of 2018.

Year-over-year, CPI inflation fell to 1.6%, from 1.8% in April, with core CPI rising to 2.1% in May, up from 2.0% in April. Though not the Federal Reserve's preferred measure of inflation, the CPI data should factor into how aggressive the Fed will be in cutting interest rates in the coming months.

"It's a little higher than we thought but it seems like it's going to take a lot more than a monthly data point to push Powell away from his dovish stance," wrote Mike Loewengart, vice president of investment strategy at E-Trade, in an email. "The Fed has pretty much made it clear that the negatives of a cooling economy and ongoing trade tensions outweigh the positives of a Goldilocks inflation number and last week's solid jobs read."

Read:Fed minutes of June meeting bolster sense of imminent interest-rate cut (http://www.marketwatch.com/story/minutes-of-feds-june-meeting-bolster-sense-of-imminent-interest-rate-cut-2019-07-10)

Investors will also continue to pay close attention to the developments on the international trade front, with the Washington Post reporting (https://www.washingtonpost.com/business/economy/trump-team-fears-new-face-on-china-trade-team-signals-tougher-stance/2019/07/10/5b6c24d2-a349-11e9-b732-41a79c2551bf_story.html?utm_term=.23a1dcb423e2) that the Trump administration is growing concerned about prospects for a trade deal with China.

Meanwhile, the Trump administration is launching an investigation into France's proposed tax (http://www.marketwatch.com/story/trump-trade-representative-to-investigate-french-tech-tax-targeting-google-amazon-and-facebook-2019-07-11) on internet giants like Google parent Alphabet Inc. (GOOGL) (GOOGL), Amazon.com Inc. (AMZN) and Facebook Inc. (FB). U.S. Trade Representative Robert Lighthizer's agency will investigate the tax under Section 301 of the Trade Act of 1974, the same provision it used last year to investigate China's technology policies, leading to tariffs on $250 billion worth of Chinese imports, the Associated Press reported.

Powell will have the opportunity to fine-tune his message when he appears before the Senate panel at 10 a.m. Eastern Time. Separately, Fed Vice Chairman Randal Quarles is set to take part in a conversation at the Bipartisan Policy Center at 1:30 p.m. Eastern, while New York Fed President John Williams is due to speak at the University of Albany at the same time.

New applications for jobless benefits for the week ended July 6 fell to 209,000 (http://www.marketwatch.com/story/us-jobless-claims-drop-to-3-month-low-of-209000-around-july-4-holiday-2019-07-11), versus 221,000 the week prior.

Which stocks are in focus?

Cigna (CI) and CVSHealth (CVS) were up following news the Trump adminisration is dropping a plan to curb rebates that drug manufacturers pay to pharmacy-benefit managers such as Cigna's Express Scripts (http://www.marketwatch.com/articles/cigna-cvs-health-soar-as-dow-jones-industrial-average-rises-51562850268).

Shares of Delta Air Lines Inc. (DAL) rose 0.2%, after the air carrier reported (http://www.marketwatch.com/story/delta-boosts-profit-outlook-dividend-2019-07-11) that second-quarter revenue rose 8.7% in the second-quarter from a year ago, while revenue per mile per seat rose by 3.8%. and earnings growth beat analysts projections.

Unlike its competitors, Delta does not own any of Boeing 737 MAX jets which have been grounded for four months by the FAA. American, Southwest and United have lost a combined 72 jets from their fleets. While their shares have lagged behind the rest of the market, Delta's have kept pace with it.

Bed Bath and Beyond Inc. (BBBY) reported large losses (http://www.marketwatch.com/story/bed-bath-beyond-earnings-slammed-by-another-large-impairment-charge-2019-07-10) due to impairment charges for a second consecutive quarter Wednesday evening, though it beat analyst estimates for earnings when adjusting for those costs. Shares in the home goods retailer fell 6.3% early Thursday

Shares of Weight Watchers International Inc. (WW) rose 5.3% before the bell Thursday, after J.P. Morgan analyst Christina Brathwaite said she was no longer bearish (http://www.marketwatch.com/story/weight-watchers-stock-jumps-after-jp-morgan-backs-off-from-bearish-stance-2019-07-11) on the weight management and wellness company, citing her belief that subscriber trends have stabilized.

How are other markets trading?

   The yield on the 10-year U.S. Treasury note   rose nearly 2 basis points 2.081%. 

In Asia, stocks closed mostly higher (http://www.marketwatch.com/story/asian-shares-rise-after-fed-signals-us-rate-cut-likely-2019-07-11), with the Nikkei 225 adding 0.5%, while the Shanghai Composite index rose 0.1% and Hong Kong's Hang Seng added 0.8%. European stocks were also trading higher, with the Stoxx Europe 600 up 0.2%.

In commodities markets, the price of crude oil rose 0.2% and the price of gold added 0.4%. The U.S. dollar fell 0.1% versus its major rivals.

(END) Dow Jones Newswires

July 11, 2019 09:41 ET (13:41 GMT)

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