The US markets closed higher on Friday, with several indexes posting all-time records, led by large gains in the tech sector. This was despite a mixed batch of second-quarter earnings from three major banks. The Atlanta Federal Reserve’s GDP Now forecast model showed that the US economy is expanding at a 2.4 percent annualized pace in the second quarter based on unexpectedly weak data on retail sales and consumer prices in June. The latest second-quarter GDP estimate was lower than the previous figure of 2.6 percent calculated on Tuesday. Friday’s figure was the Atlanta Fed model’s lowest yet for US gross domestic product in the second quarter. Its initial reading was 4.3 percent on May 1.
On the economy front, the cost Americans pay for goods and services was little changed in June, larger reflecting lower gasoline prices but also showing that a recent surge in inflation has crested. More important, the rate of inflation over the past 12 months slowed to 1.6% in June from 1.9% in the prior month, and it is down from five-year high of 2.7% just five months ago. A stripped-down measure of inflation that excludes the volatile food and energy categories rose 0.1% in June. Over the past 12 months the so-called core CPI is up 1.7%, unchanged from the prior month. Industrial production rose 0.4% in June, a touch ahead of expectations, as mining output surged 1.6%. Utilities output as flat and manufacturing output edged up 0.2%. Over the last 12 months, industrial production is up 2%. Capacity utilization rose to 76.6% from 76.4%, which was slightly below expectations.
On the other hand, sales at retailers fizzled out in the late spring after getting the season off to a fast start, likely dampening US economic growth in the second quarter. Sales at retailers nationwide fell 0.2% last month to mark the second straight drop and match the biggest decline of the year. Most retail segments posted weaker results in June. Sales at gas stations posted the biggest drop, down 1.3%, reflecting lower prices at the pump. Sales also fell at grocers, restaurants, book stores, sporting-goods stores and department stores. Retail sales have climbed a scant 2.8% in the past 12 months, about half as fast as they were rising at the start of the year.
Meanwhile, Chicago Federal Reserve Bank President Charles Evans reiterated his view that inflation that is persistently below the Fed’s 2-percent goal is a serious policy outcome miss and renewed his support for very gradual interest-rate hikes. Evans repeated much of his recent comments acknowledging the strength of the real economy and supporting a reduction in the Fed’s $4.5 trillion balance sheet. But he also warned that the Fed must show its commitment to hitting its inflation target sooner rather than later.
The Dow Jones Industrial Average added 84.65 points or 0.39 percent to 21,637.74, the Nasdaq added 38.03 points or 0.61 percent to 6,312.47, while S&P 500 edged higher by 11.44 points or 0.47 percent to 2,459.27.
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