US equities rise as soft inflation data cools rate hike expectations
Producer Price Index data reinforces easing inflation trends, reducing bets on a September Federal Reserve rate increase, though policymakers remain divided on the path forward.
US stock markets advanced on Thursday morning following the release of inflation data that tempered expectations for a September interest rate hike. The S&P 500 rose 0.4 per cent and the Nasdaq Composite gained 0.2 per cent, while the Dow Jones Industrial Average dipped 0.2 per cent. The move comes after the Producer Price Index showed prices rising less than expected, reinforcing positive signals from the Consumer Price Index released on Wednesday.
The cooling data from both the consumer and producer sides of the economy prompted traders to reduce their bets on a September rate increase. However, the Federal Reserve remains expected to implement at least one rate hike by the end of the year. It remains unclear if the recent inflation readings will be sufficient to settle the divide among policymakers regarding future monetary policy adjustments.
Corporate earnings provided mixed signals for the broader market. Shares in Cisco and Cerebras fell sharply after reporting results, with both companies identified as AI-related entities. In contrast, Applied Materials, a chipmaking equipment manufacturer, is scheduled to report results after the market close, following a 190 per cent stock gain over the past year.
Oil prices dropped on Thursday as the Trump administration shifted its military focus towards economic pressure. The administration stated that the United States retains total control over the Strait of Hormuz, disputing private data that indicated low shipping traffic. This geopolitical shift contributed to lower energy costs, a key input for inflation metrics.
Labour market data offered a mixed picture, with initial jobless claims showing first-time unemployment filings ticking up week on week, while continuing claims fell. This follows last week's surprisingly weak jobs report. Investors are also looking to upcoming earnings from Tapestry, Dillard's, and Birkenstock Holding to gauge how retailers are managing tariff refunds and their impact on margins.
