Jul 13, 2023 - Economy
With inflation in retreat, stocks hit 2023 highs
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The key U.S. gauge of consumer prices showed the lowest level of inflation since early 2021.
Why it matters: The slowdown raises the prospect that the interest rate surge — which hammered stocks last year — may really be nearly over.
- If so, the rally that started last fall may indeed be a new bull market.
By the numbers: Overall inflation in June was just 3% compared with the same month last year.
- Prices were still rising, but at the slowest pace since March 2021 — and June's price gains were smaller than analysts had expected.
The impact: Stocks rose broadly on the report, posting their best day so far this month.
- The S&P 500 increased 0.7%, while the interest-rate sensitive Nasdaq composite index rose 1.2%.
- That left the stock market sitting at its highs for the year — the S&P is now less than 7% from a new all-time high, the traditional mark that stock mavens say confirms the birth of a new bull market.
What they're saying: Falling inflation means the Fed is almost finished raising rates.
- "Today’s report is consistent with our view that Fed tightening is in its final innings," Goldman Sachs analysts wrote.
- "Most indicators of pipeline pressures — PPI, import prices, supplier deliveries — suggest goods price inflation should remain tame in coming months," wrote JPMorgan economists.
Reality check: Prices are still high — and rising, albeit more slowly than before.
- Much of the underlying collapse in inflation over the last year is simply due to the plunge in energy prices.
- Last June was when average U.S. gasoline prices hit the never-before-seen level of $5 per gallon. Nationwide, they're about 30% lower now, at $3.50 a gallon.
