Dow, S&P 500 scale new highs as inflation growth slows

(Reuters) – The S&P 500 and the Dow Jones Industrial Average hit record highs on Wednesday after data showed that growth in inflation appeared to have peaked, while economically sensitive stocks gained on the passing of a large infrastructure bill.

Nine of the 11 major S&P sectors rose in early trading after inflation numbers calmed some fears of early monetary policy tightening by the U.S. Federal Reserve.

Inflation has dictated market moves in the past few months, with investors fearing higher price pressures could force the Fed to pare back its ultra-loose accommodative stance sooner than expected.

“It’s good news. It helps keep the Fed on the couch,” said Jack Albin, chief investment officer at Cresset Capital Management in Chicago.

“(Inflation) is rising, but at a slower rate. It fits the Fed’s narrative and they can pretty much stand pat on their current strategy.”

After the U.S. Senate passed a $1 trillion bipartisan infrastructure package on Tuesday, an additional $3.5 trillion investment plan to fight climate change and poverty is also on the cards, but faces stiff resistance from Republicans.

Equipment manufacturers Caterpillar Inc and Deere & Co, construction materials supplier Vulcan Materials Co and steelmaker Nucor Corp rose between 1% and 3%, adding to sharp gains from the previous session on hopes of reaping gains from infrastructure projects.

The biggest gainers among the major S&P sectors were utilities, materials and industrials.

At 10:07 a.m. ET, the Dow Jones Industrial Average was up 173.06 points, or 0.49%, at 35,437.73, the S&P 500 was up 10.05 points, or 0.23%, at 4,446.80, and the Nasdaq Composite was up 12.95 points, or 0.09%, at 14,801.04.

NortonLifeLock Inc gained 8.5% after the cybersecurity company agreed to buy London-listed rival Avast for up to $8.6 billion.

Coinbase Global Inc rose 5.0% after the cryptocurrency exchange beat market estimates for second-quarter profit, helped by a near 38% jump in trading volumes on a sequential basis.

Virgin Galactic slid 11.1% after Morgan Stanley downgraded the stock to “underweight” from “equal-weight”, pointing to prolonged period of no flights.

Advancing issues outnumbered decliners by a 1.52-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.13-to-1 ratio on the Nasdaq.

The S&P index recorded 34 new 52-week highs and no new lows, while the Nasdaq recorded 36 new highs and 55 new lows.

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