Dow Smashes 27,000 as France Shrugs Off U.S. Trade Threat

The Dow out-performed the broader U.S. stock market Thursday after President Trump’s u-turn on drug rebates drove UnitedHealth Group Inc. (NYSE: UNH) sharply higher. In economic data, U.S. core inflation posted its biggest gain in over a year, creating some chatter among investors that the Federal Reserve may need to scale back expectations for interest rate cuts.

Dow Outperforms S&P 500, Nasdaq

The Dow Jones Industrial Average traded above 27,000 on Thursday for the first time in history. The blue-chip index closed at session highs, gaining 227.88 points, or 0.9%, at 27,088.08.

UnitedHealth Group Inc. (NYSE: UNH) was the principal driver of the rally after the Trump administration abandoned a proposal to curb government drug rebates, easing concerns of a “massive disruption to the U.S. pharmaceutical industry,” according to The Wall Street Journal.

The broad S&P 500 Index gave back gains later in the session after crossing 3,000 for the second time in as many days. The large-cap index closed up 0.2% at 2,999.91, a new record high. Gains were primarily concentrated in financials, industrials and information technology stocks.

The technology-focused Nasdaq Composite Index declined 0.1% to 8,196.04.

France Taxes U.S. Tech Giants

The French Senate on Thursday approved a new tax on the revenues of American technology companies like Google and Amazon, setting the stage for a new clash with the Trump administration. The Senate voted on the matter less than 24 hours after President Trump ordered an investigation into the so-called “digital tax” over concerns it “unfairly targets American companies.

Under the new measure, roughly 30 major companies will be taxed 3% on domestic revenues, according to CNBC. The tax will apply to companies that generate global digital service revenues of at least 750 million euros, with at least 25 million euros derived from France.

The Trump administration had warned France against implementing such measures and may be inclined to take its trade war to the European republic. This includes imposing tariffs and other trade restrictions on French goods and services.

U.S. Core Inflation Gathers Steam

Underlying consumer prices rose faster than expected in June, easing concerns that the U.S. economy was quickly losing momentum after years of quantitative easing.

The core consumer price index (CPI), which strips away volatile goods such as food and energy, rose 0.3% in June and 2.1% annually, the Department of Labor reported Thursday. Analysts in a median estimate had called for a monthly gain of 0.2%.

Firming inflation somewhat complicates the Federal Reserve’s plan to lower interest rates later this month. However, it’ll take more than just one month of rising cost pressures to convince policymakers to shift gears. The Fed targets annual inflation at 2%, but relies on the core personal consumption expenditure (PCE) index to monitor price trends.

Separately, the Labor Department said initial jobless claims fell by 13,000 last week to a seasonally adjusted 209,000, the lowest in three months.

Featured image courtesy of Shutterstock. Chart via Stockcharts.com.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi