US stocks advanced Wednesday after the release of benign inflation data reassured investors that the Federal Reserve is likely to maintain its patient approach to policy changes. The Dow rose 0.6 percent on the day, while the S&P and Nasdaq both gained 0.7 percent.
Boeing fell further late Wednesday after US authorities followed the lead taken by other countries and grounded 737 Max 8 and 9 aircraft in response to the second crash involving one of these planes in less than five months that occurred on the weekend. After the Federal Aviation Administration declared that it still considers these planes to be airworthy earlier in the week, the agency issued an executive order Wednesday afternoon temporarily grounding the Boeing aircraft and announced plans to open further investigation of the possibility of shared cause of the two fatal 737 Max 8 crashes.
Producer price pressures remained subdued in January, broadly in line with consumer price data released early in the week and likely reinforcing the Federal Reserve’s assessment that there is no urgency to adjust policy settings. Producer prices rose 0.1 percent on the month, up from a decline of 0.1 percent in December and just below the consensus forecast of 0.2 percent, with the year-on-year change easing from 2.0 percent to 1.9 percent. A sharp increase in energy prices was offset by weaker food prices. Excluding these two products, prices rose 0.1 percent on the month and inflation eased from 2.6 percent to 2.5 percent, while if trade services are also excluded, prices again rose 0.1 percent and inflation fell from 2.5 percent to 2.3 percent.
Headline durable goods orders were stronger than expected in January, increasing 0.4 percent on the month in contrast to the consensus forecast for a drop of 0.6 percent though slowing from revised growth of 1.3 percent in December. Underlying measures were mixed. Excluding transportation equipment, orders fell 0.1 percent, a little weaker than the consensus forecast for an increase of 0.1 percent, but the core measure (nondefense ex-aircraft) beat expectations comfortably, up 0.8 percent compared with the consensus forecast of 0.1 percent. Orders for machinery, computers, communications equipment, aircraft, and electrical equipment all posted solid increases, offset by a decline in orders for vehicles.
Construction spending rebounded in January, up 1.3 percent on the month after falling a revised 0.8 percent in December and above the consensus forecast for an increase of 0.3 percent. Similarly to the strength in durable goods orders, nonresidential construction spending was solid, up 0.8 percent on the month, with public nonresidential spending also posting a strong increase. Residential spending was mixed, with an increase in spending on multi-family buildings offset by a sharp fall in spending on single-family homes.
These data reflect observations at 4:00 PM US ET. Gold rose US$12.70 to US$1,310.80 while dated Brent spot crude gained US$0.99 to US$67.66. The US dollar weakened against all other major currencies, with the pound posting a particularly strong gain. The yield on the US Treasury 30-year bond rose 2 basis points to 3.01 percent while the 10 year note rose 1 basis point to 2.61 percent.