Markets edge higher after inflation for consumer prices holds steady

Dow went up 129, advancers over decliners 5-4 & NAZ was off 11.  The MLP index added 1+ to 270 & the REIT index rose 2 to the 412s.  Junk bond funds were flattish & Treasuries had limited buying which reduced yields (more below).  Oil slid back to the 77s following recent strength & gold dropped 19 to 2488 on profit taking.

Dow Jones Industrials

Inflation fell in Jul to the lowest level in more than 3 years, a welcome sign for the Federal Reserve even as prices remained uncomfortably high for Ms of Americans.  The Labor Dept said that the consumer price index, a broad measure of how much everyday goods like gasoline, groceries & rent cost, rose 0.2% in Jul from the previous month, in line with expectations.  Prices climbed 2.9% from the same time last year, beating the 3% headline gain forecast, marking the lowest level of inflation since Mar 2021.  Another data point that measures underlying inflationary pressures within the economy also moderated last month.  Core prices, which exclude the more volatile measurements of gasoline & food in order to better assess price growth trends, also increased 0.2% in Jul.  From the same time last year, the gauge climbed 3.2%.  Both of those readings are in line with expectations.  Altogether, the report indicates that inflation is loosening its stranglehold on the US economy, though prices still remain above the Fed's 2% target.  The slightly softer-than-expected report comes as Federal Reserve policymakers contemplate when to start cutting interest rates amid signs that the economy is cooling.  Policymakers voted to hold rates steady at a 23-year high during their Jul meeting, but Fed Chair Jerome Powell told reporters afterward that a Sep reduction is "on the table."  High inflation has created severe financial pressures for most US households, which are forced to pay more for everyday necessities like food & rent.  A 0.4% jump in shelter prices last month contributed to 90% of the total headline increase in Jul.  Housing has been one of the biggest drivers of inflation over the past year.  Rent costs rose 0.5% for the month & are up 5.1% from the same time last year.  High rents are concerning because higher housing costs most directly & acutely affect household budgets.  Consumers also saw a rise in food prices, which have been one of the most visceral reminders of inflation for many households.  The cost of food rose 0.2% over the course of the month, which included a 0.1% increase in groceries.

Inflation report just dropped — and it’s a welcome sign interest rates could lower

Treasury yields rose slightly as investors considered the latest inflation data & what it could mean for the economy & Federal Reserve monetary policy.  The yield on the 10-year Treasury rose 1 basis point to 3.867% & the 2-year Treasury yield was last at 3.991% after rising by more than 4 basis points.  Yields & prices move inversely & 1 basis point equals 1/100th of a percent (0.01%).  The moves come after the latest inflation data came in as expected, adding to investor confidence that the Federal Reserve has room to start cutting interest rates in Sep.  The next central bank policy meeting wraps up Sep 18.  The latest CPI numbers came 1 day after producer prices, a measure of prices at the wholesale level, came in less than expected, with Treasury yields falling after the data.  Jul PPI rose 0.1% on a monthly basis, less than the forecast rise of 0.2%.  The inflation reports are strengthening the odds of a Sep rate cut & helping investors to express greater concern that economic growth is slowing rather than focus on rising prices.  Markets were last pricing in a 100% certainty of a Sep rate cut, according to CME Group's FedWatch tool, but were split on whether the cut would total 0.25% or 0.50%.

Treasury yields move slightly higher as July CPI comes in as expected

Mars will acquire Kellanova (K) for $35.9B in cash, tying together some of the largest US candy & snack brands.  The M&M owner Mars is acquiring the Kellanova, a WK Kellogg (KLG) spin-off company, for $83.50 per share.  Kellanova, which separated from its parent company in 2023, will bring massive brands like Pringles & Cheez-Its to Mars' snacking unit.  “Kellanova has been on a transformation journey to become the world’s best snacking company, and this opportunity to join Mars enables us to accelerate the realization of our full potential and our vision,” said Steve Cahillane, chair, pres CEO of Kellanova.  After years of high inflation, some consumers are pulling back on spending & struggling to afford brand-name snacks, making acquisitions more attractive.  Many grocers have leaned into private-label options to entice consumers who are looking for value.  Mars' buyout aims to create a “broader, global snacking business” thru recognized & popular brands, according to Andrew Clarke, global pres of Mars Snacking.  “The Kellanova brands significantly expand our Snacking platform, allowing us to even more effectively meet consumer needs and drive profitable business growth,” Clarke added.  The transaction is expected to close in the first ½ of 2025.  Kellanova stock rose 5.71 (8%) & WK Kellogg stock was up 67¢.

Mars to acquire snack maker Kellanova in $36 billion deal

Today's inflation data came in line with estimates.  At the open, gains were modest but buying picked up in the last hour.  Inflation has remained above the Federal Reserve's 2% target on an annual basis.  But recent economic data, including a sell-off-inducing Jul jobs report, has helped fuel a narrative the central bank should cut rates sooner rather than later.