REUTERS/BRENDAN MCDERMID/FILE PHOTO
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City on August 8. U.S. indices closed higher today, hitting a nearly two-week high, after weaker producer price data fueled speculation that the Federal Reserve will cut interest rates in September.
US indices closed higher today, nearly hitting a two-week high, after weaker producer price data increased speculation that the US Federal Reserve will cut interest rates in September.
US producer prices rose less than expected in July as increases in the cost of goods were tempered by cheaper services, suggesting inflation is continuing to ease. In the 12 months to July, the producer price index rose 2.2%, after rising 2.7% in June.
Investors are now waiting for key July consumer price figures on Wednesday and retail sales on Thursday to back up their bets on an aggressive rate cut by the Federal Reserve.
“The core producer price index numbers support the notion that the Fed has done an excellent job of keeping inflation relatively under control and that the more likely move will be a rate cut sooner rather than later,” said Michael James, managing director of equity trading at Wedbush Securities.
“You get the CPI report tomorrow morning. Every data point is going to have an outsized impact on the market because people are so nervous right now.”
According to the CME’s FedWatch tool, traders now believe there is a 55 percent chance that the US Federal Reserve will cut interest rates by 50 basis points. Before the report, the probability was less than 50 percent, according to CME.
Stocks wobbled on Monday, with the S&P 500 nearly unchanged and the Nasdaq making modest gains after a turbulent week marked by mixed economic reports and an interest rate hike by Japan’s central bank.
The S&P 500 gained 90.04 points, or 1.68%, to close at 5,434.43, while the Nasdaq Composite gained 407.00 points, or 2.43%, to 17,187.61. The Dow Jones Industrial Average rose 408.63 points, or 1.04%, to 39,765.64.
The best performing sectors were information technology and consumer discretionary.
Utilities stocks fell on lower oil prices as OPEC’s decision to cut its 2024 demand growth forecast dampened concerns about supply risks due to escalating conflicts in the Middle East.
The Russell 2000 Index, which focuses on small companies, rose 1.6 percent.
Starbucks was the top performer in the S&P 500, rising 24.5 percent, its biggest one-day percentage gain ever, after the coffee retailer named Chipotle Mexican Grill boss Brian Niccol as chairman and CEO. Chipotle shares fell 7.5 percent.
Home Depot reversed its losses and rose 1.2 percent. The home improvement chain forecasts a decline in annual profit and an even sharper decline in comparable sales year-over-year.
BuzzFeed rose 25.9% after the digital media company narrowed its second-quarter net loss to $6.6 million from $22.5 million a year earlier.
On the NYSE, advancing stocks outnumbered declining stocks by a ratio of 4.36:1. On the Nasdaq, advancing stocks outnumbered declining stocks by a ratio of 2.59:1.
The S&P 500 posted 17 new 52-week highs and three new lows, while the Nasdaq Composite posted 55 new highs and 128 new lows. (Reporting by Abigail Summerville in New York; Editing by Rod Nickel)
