Stock Market Today – 9/12: Stocks Extend Gains Amid Dollar Retreat With Inflation Data In Focus

Updated at 11:35 am EST

U.S. stocks moved higher Monday, extending gains for Wall Street after its first weekly advance in over a month, as a sliding U.S. dollar added to global risk appetite.

The dollar index, which tracks the greenback against a basket of six global currencies, was marked 1% lower from Friday’s closing levels to trade at a two-week low of 107.942 in overnight dealing.

The moves extended a 2.5% decline for the dollar since it reached a fresh 20-year high last week, thanks in part to hawkish signaling on rate hikes from the European Central Bank, which has boosted the euro, and hits at foreign exchange market intervention from the Bank of Japan to support the slumping yen.

The declines are significant in that, while bets on a 75 basis point rate hike from the Federal Reserve next week in Washington are hovering at around 90%, stocks continue to build on last week’s modest rally, suggesting investors are starting to find more faith in the fact that U.S. companies will be able to generate solid earnings growth over the coming quarters.

Third quarter earnings for the S&P 500 are likely to grow 5.1% from last year to a collective $469.7 billion, Refinitiv data indicates, easing from a second quarter tally of $475.4 billion.

A more immediate concern, of course, is both the pace of domestic inflation, and markets will likely focus on two key data releases this week hat could define the central bank’s near-term rate path and determine if the U.S. economy is heading for its hoped-for ‘soft landing‘.

The Commerce Department will publish August inflation data on Tuesday, with economists looking for a month-on-month decline in consumer price pressures, taking the annual rate down to around 8.1%. 

Retail sales data will follow on Thursday, with expectations that the ongoing decline in gas prices will allow for an expansion of discretionary spending and drive the consumer the economy — the largest growth component — into a solid recovery over the second half of the year.

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Another focus for investors keen on finding a market perspective for inflationary pressures will be the sale of $35 billion in 10-year Treasury bonds on Monday. Healthy demand, particularly from foreign buyers, will lower government borrowing costs and suggest that growth concerns may begin to outweigh inflation worries in the months ahead.

The dollar’s recent decline, however, hasn’t been followed by a significant side in U.S. Treasury bond yields, however, as investors absorb the accelerating run-off of the Fed’s $8.9 trillion balance sheet and the sale of $95 billion on government, agency and mortgage bonds now expected each month.

Benchmark 2-year Treasury note yields were last seen trading at 3.546%, just shy of the November 2007 high reached last week, while 10-year notes held at 3.295% ahead of the $35 billion auction later today.

On Wall Street, the S&P 500 was marked 45 points higher in the opening hour of trading while the Dow Jones Industrial Average gained 298 points. The tech-focused Nasdaq gained 136 points.

In overseas markets, Europe’s Stoxx 600 benchmark gained 1.78% by the close of trading in Frankfurt while the region-wide MSCI ex-Japan index gained 0.7% amid holiday closures for major markets. Japan’s Nikkei 225 rose 1.16% higher to close at a two-week high of 28,542.11 points. 

In terms of individual stocks, Bristol Myers Squibb  (BMY)  shares moved firmly higher Monday after the drugmaker received federal approval for a new psoriasis treatment known as Sotyktu.

Occidental Petroleum  (OXY)  shares jumped higher Monday after billionaire investor Warren Buffett added to both his stake in the oil major and speculation that he may be preparing to buy at least half of its outstanding stock.

Twitter  (TWTR)  shares edged lower after Tesla  (TSLA)  CEO Elon Musk made yet another attempt to scrap his agreement to buy the social media group.

Walt Disney  (DIS)  shares nudged higher after activist investor Dan Loeb appeared to back away from an earlier demand for the entertainment group to seek the sale of its ESPN television network.

Oracle  (ORCL)  shares moved higher in pre-market trading ahead of the cloud-focused software group’s fiscal first quarter earnings after the close of trading.