Summary

The Dow Jones Industrial Average chalked up a new record high on Thursday, due mostly to Boeing, while the S&P 500 fell because of higher-than-expected inflation increasing the chances of an interest rate hike. Boeing rose 1.36 percent after Deutsche Bank raised its price target on the stock.

The S&P 500 and Nasdaq moved lower after a Labor Department report showed consumer prices rose more than expected in August, boosting the odds of another interest rate hike this year.

The consumer price index 0.4-percent gain last month was its largest in seven months and is the last piece major economic data to be released ahead of the Federal Reserve’s Sept. 19-20 policy meeting.

The odds of an increase in interest rates by the Fed in December rose above 50 percent for the first time since July, according to CME Group’s FedWatch tool.

The Nasdaq fell dropped 0.48 percent primarily because of a 0.86-percent decline in Apple.

The energy index rose 0.39 percent after domestic crude hit $50 per barrel for the first time since Aug. 10 on a bullish demand forecast by the International Energy Agency.

Helped by strong corporate earnings reports and optimism that President Donald Trump will cut business taxes, the Dow is now up 12 percent this year. The S&P 500, up 11 percent in 2017, is trading at 17.6 times expected earnings.

The consumer discretionary index fell 0.54 percent, pulled down by a 0.74-percent decline in Amazon.com and a 0.93-percent dip in Walt Disney DIS.N.

Equifax fell 2.35 percent after the Federal Trade Commission opened a probe into the company’s massive data breach.

Approximately 6.0 billion shares changed hands on the major domestic equity exchanges, a number that was above the 5.8 billion share 20-day average.

Economic News

Consumer prices accelerated in August amid a jump in the cost of gasoline and rental accommodation, signs of firming inflation that boosted the probability of an interest rate increase from the Federal Reserve in December.

The Fed is expected to delay its third-rate increase until December this year because inflation remains low, despite the labor market being near full employment. August’s inflation readings support the views of some Fed officials that a cooling in price pressures in the past months was temporary.

Other data on Thursday indicated an unexpected decline in the number of Americans filing applications for unemployment benefits last week. Though the data was impacted by hurricanes Harvey and Irma, the labor market remains healthy with increasing reports of worker shortages in some industries.

The Labor Department reported on Thursday that its Consumer Price Index was up 0.4 percent last month after edging up 0.1 percent in July. August’s gain was the largest in seven months and lifted the year-on-year increase in the CPI to 1.9 percent from 1.7 percent in July.

The Labor Department said Harvey had a “very small effect on survey response rates in August.” Gasoline prices surged 6.3 percent, the biggest gain since January, after being unchanged in July. Further increases are likely in September after Harvey forced temporary closures of some refineries on the Gulf Coast.

Stripping out the volatile food and energy components, consumer prices increased 0.2 percent in August. The increase, which followed four straight monthly increases of 0.1 percent, was driven by a 0.4 percent jump in the cost of rental accommodation. Rents gained 0.2 percent in July.

Owners’ equivalent rent of primary residence rose 0.3 percent in August after advancing by the same margin in July.

In the 12 months through August, the so-called core CPI rose 1.7 percent, increasing by the same margin for four straight months. While Fed officials are likely to treat the gasoline-driven rise in the CPI as temporary, they could take comfort in the pickup in the monthly core CPI.

The Fed’s preferred inflation measure is the personal consumption expenditures (PCE) price index excluding food and energy. The annual increase in the core PCE has consistently undershot the U.S. central bank’s 2 percent inflation target since mid-2012.

In the wake of the inflation data, the probability of a December rate hike increased to 50.9 percent from 41.3 percent on Wednesday, according to CME Group’s FedWatch program.

In a second report on Thursday, the Labor Department reported that initial claims for state unemployment benefits declined by 14,000 claims to seasonally adjusted 284,000 claims for the week ended Sept. 9.

Claims have now been below 300,000, a threshold associated with a robust labor market, for 132 consecutive weeks. That is the longest such stretch since 1970, when the labor market was smaller. Economists had forecast claims rising to 300,000 in the latest week.

In addition to higher gasoline prices and rents, inflation in August was also lifted by increases in the cost of food, doctor and hospital visits, and prescription medication.

Prices for apparel rose last month as did the cost of household furnishings, motor vehicle insurance and recreation. However, prices for used cars and trucks continued to fall as did the cost of mobile phone services. Price wars by mobile phone service providers have contributed to restraining inflation growth. Airline fares also fell last month.

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