On Wednesday, major US equity indexes experienced a notable increase as traders closely examined the latest consumer inflation metrics while anticipating the upcoming producer prices report for August. The Nasdaq Composite surged by 2.2%, reaching 17,395.5, whereas the S&P 500 moved ahead by 1.1% to 5,554.1.
The Dow Jones Industrial Average also saw a modest rise of 0.3%, landing at 40,861.7. The technology sector emerged as a leader in gains, appreciating by 3.3%, while sectors such as energy and consumer staples faced significant declines. In terms of economic indicators, the US consumer inflation rates showed an expected increase last month on a sequential basis.
Notably, the yearly inflation measure recorded its smallest rise since February 2021, highlighting a potential shift in economic stability according to government data. TD Economics provided insights, stating in their client note, "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 adopt a cautious stance and implement a modest 25-basis-point reduction while signaling the potential for further easing in the upcoming months." As the market anticipated the Federal Reserve's next move, the likelihood of a 25-basis-point interest rate cut on September 18 surged to 85%, up from 66% a day prior.
Meanwhile, the probability of a more ambitious 50-basis-point reduction decreased from 34% to 15%, as indicated by the CME FedWatch tool. Traders are also awaiting the official producer prices data for August, set to be released Thursday, which could provide further clarity on inflation trends and the broader economic outlook. On the mortgage front, applications within the US increased for the third straight week, driven by lower 30-year rates for conforming loan balances, which fell to their lowest point since February 2023 according to the Mortgage Bankers Association. In the bond market, the US two-year yield rose by 4.1 basis points, settling at 3.65%, while the 10-year rate increased by 1.9 basis points to 3.66%.
Turning to energy markets, West Texas Intermediate crude oil prices jumped by 2.1%, closing at $67.12 per barrel on Wednesday. In contrast, Brent crude fell below $70 for the first time in over two years on Tuesday, while WTI hit a low not seen since December 2021. According to Saxo Bank's analysis, "Crude's ability to stage a rebound will depend on several factors, most notably next week's Federal Open Market Committee meeting and the dollar's reaction to a predicted rate cut." In corporate news, notable stock performances included Nvidia ($NVDA) and Super Micro Computer ($SMCI), rising 8.2% and 7.9% respectively, earning spots among the S&P 500 and Nasdaq's top performers.
On the downside, Campbell Soup ($CPB) shares dropped by 3.8%, marking one of the most significant declines on the S&P 500. The company’s Chief Executive, Mark Clouse, stated intentions to rebrand as "The Campbell's Company". Further, the fiscal fourth-quarter loss for Manchester United ($MANU) increased due to declines in revenue across two of its three reportable segments.
This British soccer club projects that restructuring initiatives will have an impact on fiscal results in 2025, leading to a 4.6% drop in shares on Wednesday. In commodities, gold prices edged down 0.1%, settling at $2,541 per troy ounce, while silver prices increased by 1.2% to $28.97 per ounce. Overall, the market dynamics reflect a complex interplay of inflation expectations, energy prices, and notable corporate developments as investors seek to navigate the shifting economic landscape..