On Wednesday, US benchmark equity indexes posted significant gains as traders processed the latest consumer inflation data and geared up for the producer prices report set for August. The Nasdaq Composite surged an impressive 2.2%, closing at 17,395.5, while the S&P 500 experienced a solid uptick of 1.1%, ending at 5,554.1.
Not to be left behind, the Dow Jones Industrial Average increased by 0.3%, finishing the day at 40,861.7. Driving these advances, the technology sector led the pack, showing robust growth of 3.3%, while the energy and consumer staples sectors faced the steepest declines, highlighting a clear shift in the market's focus. In terms of economic indicators, the US consumer inflation rate rose as anticipated last month, registering an incremental change on a sequential basis.
Yearly metrics, however, indicated the smallest increase since February 2021, as affirmed by government data. TD Economics noted in a client communication that, "The August readings of employment and inflation have done little to strengthen the case for a larger, 50-basis-point rate cut next week. Instead, the Federal Reserve is likely to play it cool, opting for a more modest 25 basis point cut while also signaling additional easing measures in the upcoming months." The probabilities surrounding potential interest rate adjustments have shifted considerably, with the likelihood of a 25-basis-point reduction on September 18 rising to 85% on Wednesday, up from 66% the day prior.
Conversely, the odds for a more aggressive 50-basis-point cut plummeted to just 15%, down from 34%, as reported by the CME FedWatch tool. Eyes are now set on the upcoming official producer prices data for August, which will provide further insight into inflation trends. Moreover, the Mortgage Bankers Association revealed that mortgage applications in the US rose for the third consecutive week, fueled by a decline in the 30-year conforming loan rate, which has now reached its lowest point since February 2023. In terms of yields, the US two-year treasury yield increased by 4.1 basis points to reach 3.65%, while the 10-year treasury rate gained 1.7 basis points to settle at 3.66%. On the commodity front, West Texas Intermediate (WTI) crude oil prices jumped 2.3%, reaching $67.27 per barrel.
However, Brent crude fell below the $70 mark on Tuesday for the first time in over two years. According to a report by Saxo Bank on Wednesday, "Crude's ability to stage a rebound will depend on several factors, prominently including next week's Federal Open Market Committee meeting and the dollar's response to the anticipated rate cut." Turning to corporate news, shares of Nvidia ($NVDA) and Super Micro Computer ($SMCI) shone brightly on the S&P 500 and Nasdaq, rising 8.2% and 7.9%, respectively.
In contrast, Campbell Soup ($CPB) experienced a decline of 3.8%, marking one of the most significant drops within the S&P 500. The company, under the leadership of Chief Executive Mark Clouse, is looking to rebrand itself as "The Campbell's Company." In the sports sector, Manchester United ($MANU) reported a fiscal fourth-quarter loss, compounded by revenue declines across two of its three reportable segments.
The British soccer club is navigating through restructuring initiatives anticipated to impact its fiscal 2025 results, leading to a 4.6% drop in its shares listed on the New York Stock Exchange. Lastly, precious metals remained relatively stable as gold traded at $2,542.30 per troy ounce, while silver experienced a modest gain of 1.5%, rising to $29.05 per ounce.
Overall, the market dynamics present an intricate interplay between inflationary trends, interest rate speculations, and sector-specific performances, underscoring the importance of strategic investment decisions in a shifting economic landscape..