In a significant move, U.S. equity indexes experienced gains as government bond yields increased, driven by a relatively robust inflation report that has bolstered the likelihood of a gradual easing of monetary policy beginning next week. The S&P 500 index appreciated by 0.7%, settling at 5,590.2, while the Nasdaq Composite surged by 0.9% to reach 17,550.4.
The Dow Jones Industrial Average also showed resilience, rising 0.5% to 41,048.8 after encountering earlier fluctuations during the session, although real estate saw a decline against this backdrop. The Bureau of Labor Statistics revealed that the U.S. Producer Price Index (PPI) advanced by 0.2% month-over-month in August, following a stagnant July reading.
This figure exceeded the anticipated 0.1% increase forecasted in a Bloomberg survey. When excluding food and energy prices, the core PPI grew by 0.3%, surpassing the expected 0.2% rise and rebounding from a 0.2% decrease in the preceding month. Year-over-year insights showed PPI was up 1.7% in August compared to a 2.1% growth reported in July.
Notably, the core PPI—excluding only food and energy—saw a modest acceleration to 2.4%, improving from 2.3%. Additionally, the PPI excluding food, energy, and trade services rose to 3.3% from 3.2%. The stronger-than-anticipated PPI readings, combined with Wednesday's unexpected rise in core Consumer Price Index (CPI)—attributed largely to a spike in shelter costs and airfare—highlight the Federal Open Market Committee's (FOMC) ongoing vigilance regarding inflation, as emphasized in a recent note from Stifel.
Lindsey Piegza, Chief Economist at Stifel, remarked, 'While continuing a disinflationary trend and supporting the Fed's intentions to open the door to rate cuts in less than one week's time, the ongoing uncertainty and unevenness in price growth reinforces the need for a slow and tempered approach to policy adjustment as the data continue to evolve.' Furthermore, the latest market scrutiny revealed that the probability of a substantial 50 basis point cut in interest rates plummeted to 13% as of Thursday afternoon, down from 40% just a week earlier.
Contrarily, the likelihood of a more modest 25 basis point cut rose to 87%, increasing from 60% last week. The FOMC's policy announcement is anticipated on September 18. Additionally, initial jobless claims in the U.S. increased to 230,000 for the week ending September 7, a slight rise from the upwardly revised figure of 228,000 from the previous week, defying analyst predictions that anticipated a decline to 227,000.
The four-week moving average also ticked up by 500, now standing at 230,750. Intraday movements indicated a rise in Treasury yields, with the 10-year yield climbing 4.7 basis points to 3.7%, while the two-year yield saw a 2.6 basis points increase to 3.67%. In commodity news, West Texas Intermediate crude oil prices surged by 2.7%, reaching $69.14 per barrel.
From a corporate perspective, Moderna ($MRNA) announced a plan to reduce its research and development expenditures as the firm aims to streamline costs and prioritize upcoming product launches. This announcement resulted in a substantial share plunge of 12%, marking it as the worst performer on both the S&P 500 and Nasdaq indexes.
In contrast, Warner Bros. Discovery ($WBD) and Charter Communications ($CHTR) disclosed their multi-year distribution agreement, integrating both linear and streaming video services. Post-announcement, Warner Bros. shares skyrocketed by 8.1%, becoming the leading performer on the Nasdaq. The commodities market saw gold prices jump by 1.5%, reaching $2,581.11 per ounce, while silver surged by 4%, reaching $30.09..