US stocks wavered on Thursday after a key report on consumer inflation came in cooler than thought, as consumer prices unexpectedly fell on a month-over-month basis for the first time since 2020.

The S&P 500 (^GSPC) hovered near the flatline, after the broad index crossed 5,600 for the first time on Wednesday. The Dow Jones Industrial Average (^DJI) fell 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) was little changed.

The Consumer Price Index (CPI) declined 0.1% over the previous month and increased just 3.0% over the prior year in June. The annual gain was the slowest rise in consumer prices since early 2021.

Stock gains have picked up pace this week as Fed Chair Jerome Powell has suggested that conditions are almost right for the Federal Reserve to start making interest-rate cuts. Thursday’s inflation look bolstered bets on a cut by September, with around 87% of traders expecting such an outcome, according to the CME FedWatch tool.

In corporates, Costco (COST) shares rose after the retailer said it will hike membership fees for the first time since 2017 — seen by some as reflecting price pressures on consumers.

Meanwhile, the new earnings season stirred into life with reports from Pepsi (PEP) and Delta Air Lines (DAL), setting the stage for big bank earnings to kick off second-quarter results in earnest.

Delta shares sank roughly 10% after the carrier’s earnings missed Wall Street estimates, while PepsiCo stock tipped lower as its revenue disappointed investors.

Live5 updates

  • Stocks hold steady after inflation cools in June

    Stocks held steady on Thursday after the slowest annual rise in inflation since early 2021.

    The S&P 500 (^GSPC) rose just above the flatline after it crossed 5,600 for the first time on Wednesday. The Dow Jones Industrial Average (^DJI) fell slightly, while the tech-heavy Nasdaq Composite (^IXIC) gained 0.1%.

    Falling gas prices helped the Consumer Price Index (CPI) in June decline 0.1% from the prior month after prices were unchanged in May.

    Cooling inflation bolsters market expectations that the Federal Reserve will meet its 2% inflation target and start cutting rates this year.

  • Inflation falls in June for first time since 2020

    Two years ago, the June CPI report brought investors the news that inflation was rising at the fastest pace in 40 years.

    Today, investors learned inflation fell last month for the first time since May 2020 as the prospect of (multiple) rate cuts from the Federal Reserve later this year grows more likely by the day.

    The headline Consumer Price Index (CPI) in June fell 0.1% from the prior month after prices were unchanged in May. On a “core” basis, which excludes food and energy, CPI rose 0.1%. Economists had expected prices to rise 0.1% and 0.2%, respectively, last month.

    On an annual basis, prices rose 3% in June and 3.3% on a core basis.

    The jump in core CPI over the prior year was the smallest since April 2021.

  • Delta joins PepsiCo in calling out consumer weakness

    OK, OK, I get it — we are only two earnings reports into earnings season with results from PepsiCo (PEP) and Delta (DAL) out this morning.

    But, I am instantly concerned about the state of the consumer and how that may impact the vibe around earnings reports in coming weeks (which will arrive against the backdrop of a record-setting market).

    Here’s what Delta CEO Ed Bastian told Yahoo Finance’s Brad Smith about the consumer:

    “Our second quarter was really strong. As we look into the third quarter we see another strong quarter. The domestic marketplace is where a little bit of the price sensitivity is starting to take hold, and it’s in the lower fare buckets.”

    And here’s what PepsiCo CEO Ramon Laguarta said on the consumer on his earnings release:

    “During the second quarter, our business delivered net revenue growth, strong gross and operating margin expansion and double-digit EPS growth, remaining agile despite facing difficult net revenue growth comparisons versus the prior year, subdued category performance within North America convenient foods and the impacts associated with certain product recalls at Quaker Foods North America.”

  • Quick take on PepsiCo’s earnings

    Eight straight quarters of global volume declines for PepsiCo (PEP) isn’t going to sit well in the stomachs of investors this morning.

    Seeing the stock sell off by 2% in the pre-market, which looks deserved after a first pass of the results.

    I am catching up with PepsiCo CEO Ramon Laguarta around 9:30 a.m. ET today by phone. Will then be hopping on Yahoo Finance around 9:50 a.m. ET, so flip us on for the latest analysis!

  • Costco’s stock before and after a membership fee hike

    Costco (COST) finally pulled the trigger last night on a much-discussed membership fee increase.

    The entry-level fee will go up to $65 from $60, and the upper-tier membership will go up $10 to $130.

    Here’s the vibe around Costco’s stock before and after a fee hike, compliments of Stifel analyst Mark Astrachan:

    “COST shares have outperformed the S&P 500 in the 3, 6, 9, and 12-months leading to a membership fee increase announcement in each of the last three cycles since 2006, with price increases in 2006, 2011, and 2017. For example, COST shares averaged 11.3% outperformance relative to the S&P 500 in the 12-months ahead of the MFI announcement in the three price increases beginning in 2006. Average outperformance has been most notable in the six and nine months ahead of a MFI, up 13.6% and 14.3%, respectively. Conversely, COST shares have consistently underperformed the S&P 500 over the same periods post MFI announcement.”

    Costco shares are up 34% year to date.

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