Dow up 180 points as U.S. stocks on track to cement longest weekly winning streak since November

What’s driving markets?

After a week that has delivered optimistic news on both consumer price inflation and producer prices, investors received another encouraging piece of data as the University of Michigan preliminary consumer sentiment index for August showed a modest improvement over July.

The headline index rose to 55.1 in August from 51.5 in July, while one-year inflation expectations dropped to 5% this month, from 5.2% the month prior. Joanne Hsu, director of the survey, pointed to a discrepancy in sentiment between low- and middle-income consumers, and the wealthier subset.

“All components of the expectations index improved this month, particularly among low and middle income consumers for whom inflation is particularly salient. High income consumers, who generate a disproportionate share of spending, registered large declines in both their current personal finances as well as buying conditions for durables,” Hsu said.

Others praised the data as the latest indication that the Federal Reserve are succeeding in their battle against inflation.

“All things considered, we still think that headline inflation will drop below 2% by the middle of next year. But we would stress that the balance of risks is shifting, with downside risks now dominating. It’s no longer out of the question that headline inflation could briefly turn negative in the second half of 2023,” wrote Paul Ashworth, chief U.S. economist at Capital Economics.

Notably, Richmond Federal Reserve Bank President Thomas Barkin refused to commit to either a 50 basis point or a 75 basis point interest rate hike in September, and he also said that he would like to see inflation below the Fed’s 2% target for a “sustained” period before voting to cut interest rates again.

“I’d like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory,” Barkin told CNBC during an on-air interview.

His comments echoed a similarly cautious stance embraced by San Francisco Federal Reserve President Mary Daly, who said earlier that it was too soon to “declare victory” over inflation in the U.S. During an interview with the Financial Times published Thursday, Daly said a 50 basis point interest rate rise remains her baseline case for the next Fed meeting in September. However, she is not a voter on the Federal Open Market Committee this year.

All told, U.S. stocks continued to flash a bullish signal on Friday, said Mohannad Aama, a portfolio manager at Beam Capital Management.

“1% on Nasdaq is pretty good on heels of a good week overall,” Aama said. “Overall, still it is clearly risk-on this week and into today so far.”

See: Fed’s Barkin wants to keep hiking interest rates until there is a ‘sustained period’ of inflation under control

For now, stocks are set for another week of gains. Up 2.4% so far this week, the S&P 500 index is poised for its fourth straight weekly gain and the longest winning streak since the week ended Nov. 27, 2020, according to Dow Jones Market Data.

The Nasdaq was set for a fourth straight weekly win, up 2.2% for the week so far, its longest winning stream since the week ended Nov. 5, 2021.

In economic news, import and export pricing data released early Friday showed that U.S. non-fuel import prices rose more than 4% on a year-over-year basis in July.

Stocks in focus

•  Rivian Inc.
  RIVN,
  -0.23%
  said it lost $1.7 billion, or $1.89 a share, in the second quarter, compared with a loss of $580 million, or $5.74 a share, in the year-ago period. Shares gained more than 1% on the news.

• PetroChina,
  601857,
  +0.96%
  China Life Insurance
  601628,
  +1.60%,
  Sinopec
  600688,
  +1.31%
  and China Petroleum & Chemical Corp
  600028,
  +0.24%
  and Aluminum Corp. of China
  601600,
  +1.53%
  were among the companies to have separately announced their intention to delist from the New York Stock Exchange, a unit of the Intercontinental Exchange. The companies were mixed between gainers and losers on Friday.

• AMC Entertainment Holdings Inc.
  AMC,
  +2.08%,
  Bed Bath & Beyond Inc.
  BBBY,
  +20.98%
  and GameStop Corp.
  GME,
  +4.08%
  both opened higher as the latest rally in meme stocks continued on Friday. With the first up 2.4%, the second up 7.4%, and the last up 3%.

Other markets

• West Texas Intermediate crude prices CL.1 CLU22 , up 4.3% this week, wavered between gains and losses despite Thursday’s International Energy Agency report, which showed the agency had lifted its demand forecast owing to summer heat waves in Europe and tight natural-gas supplies. Crude was last down 2.4% to $91.90 a barrel on Friday.

• In the Treasury market, yields on longer-term bonds like the 10-year Treasury note were down while short-term yields were up. The 10-year
  TY00,
  +0.09%
  was down 2.9 basis points at 2.861%, while the two-year note
  TMUBMUSD02Y,
  3.240%
  was up 5 basis points at 3.248%.

• Gold was modestly higher, up 0.3% and still trading above the $1,800 per ounce level.

• The ICE U.S. Dollar Index
  DXY,
  +0.51%,
  a gauge of the dollar’s strength against a basket of rivals, was up 0.7%.

• The Stoxx Europe 600
  SXXP,
  +0.16%
  was up 0.1%, while the Nikkei 225
  NIK,
  +2.62%
  was up 2.6%. The Hang Seng index
  HSI,
  +0.46%
  was up 0.5% in Hong Kong, while the Korean KOSPI index
  180721,
  +0.16%
  was up 0.2%. China’s Shenzhen A Share index
  399106,
  -0.45%
  was down 0.5%.